Roll-out of GST regime delayed due to opposition by BJP-ruled States

In a tactical victory of sorts for Union Finance Minister Pranab Mukherjee, BJP leader and Bihar Deputy Chief Minister Sushil Kumar Modi was on Monday elected Chairman of the Empowered Committee of State Finance Ministers on GST (Goods and Services Tax) in place of the former West Bengal Finance Minister, Asim Dasgupta, who had to bow out following his defeat in the Assembly elections.

At the meeting convened by Mr. Mukherjee after a gap of nearly five months, the name of Mr. Modi (who also holds the Finance portfolio in Bihar) as chairman of the empowered panel was proposed by Delhi Chief Minister Sheila Dikshit and seconded by Orissa Finance Minister Prafulla Chandra Ghadai.

Speaking to the media after Mr. Modi's election in which he was also present, Mr. Mukherjee said: “The substantive business of today's meeting was the election of the chairman. Sushil Modi, the Deputy Chief Minister and Finance Minister of Bihar, has been elected unanimously as the chairman of the Empowered Committee of State Finance Ministers.”

The roll-out of the GST regime has been much delayed mainly owing to the opposition by BJP-ruled States such as Madhya Pradesh, Gujarat, Himachal Pradesh and Chhattisgarh, their prime concern being that the new indirect tax regime would infringe on the States' autonomy in levying taxes. Interestingly, however, Bihar is in favour of introducing the GST even though the BJP is a part of the NDA coalition in power in that State.

Perhaps, it was with this in view that the Union Finance Minister sounded out Mr. Modi in late May for chairmanship of the empowered committee whose task is to spearhead implementation of the new tax regime. However, Mr. Modi had then declined the offer owing to his preoccupation with affairs of the State.

Now that persuasion appears to have prevailed, it is being viewed as a development that would brighten the prospects of reaching a consensus among all the States on the proposed GST regime. Interacting with the media after his election, Mr. Modi advised the Centre to be flexible in its approach and take the concerns of States on board. “If the Centre is not flexible, implementation would be difficult. The States' concerns must be addressed,” he said.

Mr. Modi said that a Constitution Amendment Bill on GST was introduced in the Lok Sabha during the budget session, which was then referred to a Parliamentary Standing Committee on Finance. “There are many issues on which there were differences of views. Now it is the onus of the Standing Committee to resolve them,” he said.

Most of the contentious issues surrounding the GST, Mr. Modi said, were State-centric and were related to revenue losses that States would be incurring on account of the new tax regime. He said the empowered group would meet again in mid-August and discuss the issues relating to compensation package for phasing out Central Sales Tax for fiscal 2010-11.

Pointing out that it was not a political issue, Mr. Modi said: “GST implementation has got nothing to do with the BJP or the Congress. The Centre has still not announced the Central sales tax package. In the next meeting of State FMs, we will be discussing all these issues.”

“We are all very positive that under the leadership of Modi, all the issues which have been pending between the Centre and States... relating to VAT and GST will be amicably solved,” Gujarat's Finance Minister Finance Minister Saurabhbhai Patel said.

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