Finance Minister Pranab Mukherjee is likely to meet his State counterparts on July 21 to discuss constitutional amendments needed to roll out the proposed GST and the compensation package for the States for the possible loss of their revenue due to this new indirect tax regime.

“The Finance Minister will meet the state finance ministers to discuss compensation packages and constitutional amendment required to implement the goods and services tax (GST),” a finance ministry official told PTI here on Friday.

Before meeting Mr. Mukherjee, the Empowered Group of State Finance Ministers, headed by West Bengal Finance Minister Asim Dasgupta, will meet on the same day and discuss the constitutional amendment draft prepared by the law ministry to implement GST besides the compensation package for the States for any possible revenue loss they suffer due to GST rollout.

“We expect the draft constitutional amendment from the law ministry next week to implement GST. Some kind of preliminary approval of the empowered committee of state finance ministers is required (for this draft). For that we would send it to them before the meeting,” the official added.

The Finance Ministry had explored the feasibility of introducing a Fourth List (Union List, State List and Concurrent List being the other three) in the Constitution that gives both the Centre and the states equal taxation powers, as currently the Centre cannot impose indirect taxes beyond manufacturing, while the states cannot levy service tax. However, the Fourth List idea was dropped later on.

The other option is to allow the Centre and the States to levy GST by amending the Union and State Lists.

The States have already floated a discussion paper on GST, which will replace the excise duty and service tax at the Central level and value-added tax at the state level, besides the cess, surcharges and local taxes.

The GST is scheduled to replace most of the indirect taxes from April 1, 2011.

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