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The Centre and states are looking at a formula to sort out the row over levying goods and services tax on the high seas by letting the government collect the tax and pass it on to the states.
Sources said the formula was proposed by Karnataka to break the deadlock over the issue that emerged during discussions to roll out the tax reform. The Centre’s proposal to tax transactions that take place within 12 nautical miles from state borders has been opposed by several states, including BJP-ruled Gujarat and Maharashtra as well as Kerala, Karnataka and Odisha, which stand to lose substantial revenue.
With a case pending in the Supreme Court challenging the states’ power to levy taxes, the Centre has so far maintained an arms-length distance but with taxation on high seas becoming a constitutional issue, it is now expected to play a more active role.
The issue is expected to be discussed at Monday’s GST council meeting headed by finance minister Arun Jaitley and with states as members of the apex decision-making body.
Although the Centre is keen to sort out the issues at the earliest to roll out GST from April, a breakthrough on the issue of cross-empowerment, which relates to division of powers between the Centre and states on levying and auditing taxpayer base, may not be reached.
Jaitley, who is keen to ensure that the rules are decided based on consensus rather than voting, acknowledged that it was a race against time. This is despite his officers suggesting that the Centre should look at voting to overcome hurdles so that GST can be rolled out at the earliest.
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