Centre, states deadlock over GST likely to continue

The Centre's efforts to bring in a consensus on Goods and Services Tax (GST) before the Budget may face hurdles from the NDA-ruled states which feel that vital issue of states' autonomy has not been addressed in the new draft on the indirect tax reforms.

Ahead of the crucial meeting of state finance ministers on February 11 here, Madhya Pradesh Finance Minister Raghavji told PTI over phone that "there is nothing new in the third draft on GST Constitution Amendment Bill".

He further said there is no provision to address the issue of state autonomy. Sales tax has been a domain of state governments so why should the states allow the Centre to levy taxes on it.

On February 11, the state finance ministers will also meet Union Finance Minister Pranab Mukherjee.

Bihar Deputy Chief Minister and Finance Minister Sushil Modi said the new GST proposals may not impress the states as there is nothing on the Central Sales Tax (CST) compensation issue.

"I do not want to speculate whether the meeting would yield results or not. However, the new draft is unlikely to impress the states as the CST compensation issue has not been resolved," Modi said.

CST, a tax on movement of goods from one state to another, was reduced from 4% to 3% in 2007-08 and further to 2% in 2008-09 after the introduction of VAT as it was considered distortionary.

However, the states say they have not been adequately compensated on the loss in revenue.

Taking into consideration the states' concern, the Finance Ministry has floated the third draft on GST Constitution Amendment Bill recently.

The new draft proposed to create a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft. Besides, the Centre has also dropped any reference to the Union finance minister heading the GST Council.