Maha stops automatic adoption of Centre's GST circulars

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SME Times News Bureau | 14 Jan, 2021
In a clear case of defiance of the Centre's authority on GST matters, the Maharashtra government has decided that the state would have the last say in the applicability of circulars defining regulations on issues of the indirect tax.

A circular issued by the Maharashtra Goods and Service Tax Department (MGSTD) on January 12 says that the state would examine all circulars issued by the Central Board of Indirect Taxes and Customs (CBIC), and upon examination, issue a separate circular regarding its applicability for the implementation of the MGST Act.

With this, the state also withdrew an earlier circular no. 39 T of 2019 that provided for deemed adoption of all circulars issued by the CBIC by the MGSTD. The state, however, said that all central circulars issued till withdrawal of this circular would enjoy status quo and would be adopted for implementation of the MGST Act.

What this means is that the state would have flexibility in devising regulations to suit its interest rather than blindly following the central circulars.

In the fourth year since the GST's implementation, this is second major resistance mounted by states over implementation of GST laws. The states already strongly resisted the Centre's move on GST compensation and pushed it to frame regulations that protected their interest.

"Biggest fears of model code for a federal democratic country like India are coming true even before the completion of its 4th anniversary of GST. Fight between the Centre and states over compensation for loss has already reached judiciary, and now the state government of Maharashtra has also issued clear instructions that they will have parallel set clarifications on same matters which will supersede the clarifications issued by the Central government," said Rajat Mohan, senior partner, AMRG and Associates.

Maharashtra has justified its move suggesting that it is to maintain the integrity of communication and avoid confusion caused as to which circular instructions are to be followed. Sources, however, said it has been done as on several matters, states had a divergent view on how things needed to be implemented. In additional, unique nature operational issues in the state, created difficulties in adoption of central regulations.

Sources said that the Maharashtra government's decision would further weaken the process of decisions being taken unanimously by the GST Council.