Attorney General Mukul Rohatagi. (File Photo)
The Centre has sought the views of Attorney General (A-G) on who should have the right to tax inter-state movement of goods.
This is a new flashpoint to have emerged in the wrangling between the central and state governments for ringing in the goods and services tax (GST). But, as the reference will take some time to go through, the meeting of the GST Council this week to sort the differences could remain undecided.
Last month, the finance ministry had referred the dispute to the law ministry for its comments. In a surprising quick turnaround, the law ministry had advised North Block that the Centre will have full powers to tax inter-state movement of goods. The view was based on a series of rulings handed down by the Supreme Court over the years. The view has annoyed states, which have vehemently protested the advice. According to them, since each state administration has run the sales tax regime on goods for decades, they have built up the expertise to handle inter-state transactions, too.
On the other hand, central government’s indirect tax cadre officers who have seen their turf progressively whittled as the taxation powers of GST has expanded, have felt relieved at the law ministry’s advice. GST brings most indirect tax under its fold. More powers to states mean the taxes will be handled by the state government officers led by the respective IAS cadres.
The specialised cadre of indirect tax officers belonging to the Central Board of Excise and Customs (CBEC) are consequently on the losing end. The officers association of CBEC have called for a meeting among themselves to take stock of the developments.
If Attorney General Mukul Rohatgi, the highest law officer in the central government supports finance ministry’s position that states should tax inter-state movement of goods, the reference can be placed before the Cabinet for nullifying the law ministry’s advice.
This could cool the frayed tempers at the meeting of the GST Council, the highest decision making body which has representations from all state governments.