FinMin working on new framework for GST

Arun Jaitley plans to meet state FMs to remove hurdles in GST introduction, the ministry may look at forming an empowered panel

In a renewed attempt to introduce a national goods and services tax (GST), the finance ministry is trying to address Bharatiya Janata Party (BJP) -ruled states' concerns in the proposed legislation. It has prepared a note on GST for Prime Minister Narendra Modi, while Finance Minister Arun Jaitley is planning to meet state finance ministers to remove hurdles in its introduction.

Finance ministry officials were found digging out old speeches of Gujarat and Madhya Pradesh finance ministers to get as close to BJP's idea of GST as possible. "We are changing the emphasis," an official, asking not to be named, told Business Standard.

Jaitley has asked the revenue department to make a presentation on GST before him on Thursday. The ministry might also look at forming an empowered committee, comprising revenue department officials, as well as experts from outside, to lay out a road map for its implementation. It's a clear signal that BJP, after blocking the reform while in Opposition, now wants to speed up its implementation.

Lack of agreement between the Centre and states, particularly BJP-ruled Gujarat and Madhya Pradesh, has delayed GST, originally scheduled for rollout on April 1, 2010. But in its manifesto, BJP committed itself to "bring on board all state governments in adopting GST".

While the note to PMO mainly lists out the developments in GST so far, along with a road map for its implementation, the presentation to be made to the new finance minister might give possible solutions to end the stalemate.

States are opposing subsuming entry tax, petroleum and alcohol in GST, as that would dent their revenues. Only after reaching a consensus with states on these issues can the Centre move forward. It will have to table a revised Constitution amendment Bill in Parliament as the earlier one lapsed with the dissolution of the previous Lok Sabha.

At his meeting with revenue department officials on Wednesday, Jaitley asked for an early meeting with state finance ministers to iron out differences over the tax, officials said.

The National Democratic Alliance is short of a two-thirds majority, or 361 seats, needed for the amendment in the Lok Sabha. In the Rajya Sabha, the ruling alliance has 62 seats but needs 160 votes to pass the Bill. Half the states also need to okay the Bill.

"It will be a real challenge to get the Bill passed in Rajya Sabha," the official said.

The new indirect tax regime will subsume most of the taxes levied by the Centre, such as excise duty and service tax, besides the state-imposed ones like the value-added tax and sales tax. The industry is awaiting its introduction as that would remove the cascading affect, boost revenues, and aid economic growth.