GST roll-out: Centre must address States' concerns

Empowered Committee of State Finance Ministers Chairman Sushil Modi on Friday maintained that for timely roll-out of the GST (Goods and Services Tax) regime, the Centre will have to adopt a flexible approach and address the concerns of state governments.

Apart from the Constitution Amendment Bill introduced in the Lok Sabha for Parliamentary approval to facilitate implementation of the new indirect tax regime — and on which the empowered panel is yet to deliberate on its provisions — the more immediate concern of states is the issue of CST (Central sales tax) compensation in lieu of the revenue losses incurred by them till the current fiscal.

Speaking to the media after the empowered panel's meeting here, Mr. Modi said: “As this is a Constitution Amendment Bill, the Central Government will have to be flexible and will have to address all the concerns of the state governments”.

The statement is identical to the one Mr. Modi made when, as Bihar's Deputy Chief Minister and Finance Minister, he was elected the chief of the empowered panel of state finance ministers on GST. Clearly, the onus of timely roll-out of the new tax regime in lieu of Central levies such as excise and service tax and state taxes such as sales tax, VAT and other local levies is on the Centre and its flexibility in meeting the demands of the states. Owing to lack of a political consensus, the roll-out of the GST regime has been delayed for years and doubts have been raised on its implementation by the new deadline, April 1, 2012. Asked if its introduction by the target date would be possible, Mr. Modi said: “I am optimistic that if the way things are going, and if everybody cooperates, then we can catch the timeline also”. Evidently, much depends on the accommodativeness of the Centre.

Mr. Modi pointed out that after discussions at Friday's meeting, the panel had decided to seek compensation for the loss on account of phasing out of CST for 2010-11 and 2011-12. “Earlier, the compensation was envisaged for three years but because of the delay in GST implementation we require compensation further for 2010-11 and 2011-12. That was the main issue we discussed,” he said. The empowered committee, he said, would meet again during the last week of September or the first week of October to discuss the Constitution Amendment Bill which is lying with the Parliamentary Standing Committee on Finance. “In the next meeting, states will give their opinion. We will be discussing the Constitution Amendment Bill threadbare and then we will meet with Standing Committee on Finance and we will put forward the views of the Committee,” Mr. Modi said.

Led by the BJP-ruled states — Chhattisgarh, Gujarat, Himachal Pradesh and Madhya Pradesh — the main concern of the state governments, including the BSP-ruled Uttar Pradesh has been the perception that the new tax regime would erode their autonomy in levying taxes.

The Constitution Amendment Bill on GST was introduced in the Lok Sabha during the Budget Session and subsequently referred to the Parliamentary Standing Committee on Finance. In fact, the Bill was a revised version as the first three drafts of the GST Bill were rejected by states owing to concerns over their autonomy in taxation.

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