GST launch set to be delayed

By all indications, the proposed Goods and Services Tax (GST) — much-awaited by India Inc. for nationwide uniformity in indirect taxes — is set to miss the April 1, 2010, deadline that was slated for its introduction. A decision on fixing a fresh date for its launch is likely on Friday.

A day before the Empowered Committee of State Finance Ministers’ meeting with Finance Minister Pranab Mukherjee, panel Chairman and West Bengal Finance Minister Asim Dasgupta said: “Tomorrow, we will discuss the new date for introduction [of GST] and compensation formula to the States with the Union Finance Minister … Together [empowered committee and Mr. Mukherjee], we will announce a new date.”

Dr. Dasgupta was talking to the media here after a meeting of the State finance ministers on arriving at a revenue neutral rate for the GST which is envisaged to subsume a host of indirect taxes such as excise duty and service tax at the Central level and VAT (value added tax) at the State level, apart from surcharges, cesses and other local taxes.

Initially, the government had proposed to replace all these levies with GST from April 1, 2010. However, no consensus has been arrived at thus far, either on the mechanism of revenue sharing between the Centre and the States or on the date of its countrywide launch. Besides, the other reason for its delay is the need for Constitutional amendments for rolling out the new tax regime, apart from the preparedness and of all the 32 States and Union territories.

In fact, the BJP-ruled States, which met here on Wednesday disfavoured implementation of the GST from the new fiscal on the plea that various contentious issues with regard to the interest of the States still remain unresolved. Alongside, some other States such as Madhya Pradesh, Rajasthan and Tamil Nadu had also sought postponement in introduction of the new indirect tax regime even as the industry is looking forward to its implementation at the earliest possible.

As for the preparedness of the States, while some have come out with their discussion paper on the GST, no decision is yet in sight on the exact rates for the unified levy even as a taskforce set up by the Thirteenth Finance Commission (TFC) has recommended a single GST rate of 12 per cent.