GST regime unlikely from April 2012 states oppose draft Bill

The introduction of big-ticket tax reforms through the Goods and Services Tax (GST) regime seems unlikely from next April with the BJP-ruled states today stating that they would not like to be reduced to "municipality or corporations".

"The kind of draft that they [central government] have presented...I do not think it could be passed. Which state will agree to become a municipality or corporation? To hand over all the powers to the Centre and then beg before it for money is against the spirit of the Sarkaria Commission report," Madhya Pradesh Finance Minister Raghavji told reporters here.

He said the states were not inclined to accept the draft Bill, which had been circulated by the Centre, for the introduction of the GST.

The Constitution Amendment Bill introduced by the Centre is reactionary, said Raghavji. "It is absolutely useless and against the interest of the states. It has provisions which will curtail the autonomy of states. The Centre is interfering in the rights of the states," he added.

The Bill needs approval of two-thirds of Parliament and half of India's 28 states to become the law. Hence, BJP support is crucial at the state as well as the central level.

The Bill was introduced in the Lok Sabha in the last Budget Session. It was the fourth draft prepared by the Centre after the first three were rejected by the states, citing autonomy issues.

Raghavji said there had been no changes in the latest draft as against the previous one. "In fact, the previous draft was in some aspects much better. This one is even worse," he added.

The draft is also against the spirit of federalism enshrined in the constitution, he said, adding, "This disturbs the basic structure of the Constitution".

Among the objections raised by the BJP-ruled states is the proposal to bring the sales tax in ambit of the GST.

"Sales tax is an exclusive state subject. Now the Centre wants to interfere with that. This is unacceptable to us," Raghavji said, adding that one of the solutions could be having separate GST regimes for the states and the Centre.

The GST would subsume most of the indirect taxes like excise duty and service tax at the central level and VAT on the state front, besides local levies.

The implementation of GST, considered to be a major tax reform, has been stuck for years due to differences between the Centre and some states over the new structure.

Despite political differences, the UPA government at the Centre is hopeful of being able to introduce new indirect taxes regime from April 1, 2012.