GST rollout hinges on compensation to states: Sushil Kumar Modi

Bihar deputy CM says Centre should commit to compensate states for initial five years in case of any revenue loss in new tax regime

The Bihar deputy chief minister and empowered committee chairman on goods and services tax (GST), Sushil Kumar Modi, today said GST could be implemented within six months if the Centre committed to compensate states for five years in case of any revenue loss in the new tax regime.

Citing the issue of compensation by the Centre as the key bottleneck, Modi said: "There has been significant progress. Now, we are within the reach of GST. Eighty per cent of the issues are resolved. If the Centre agrees for compensation, we can shift to the GST regime in six months."

Speaking at an interactive session on GST organised by the Bharat Chamber of Commerce here, he added: "It’s not that the state will incur revenue loss on account of the proposed GST. But there is a genuine concern of the states. To allay fears, the Centre should agree to compensate for a period of five years from the time of implementation."

Although the Centre is considering such a compensation package for states, Modi said it was yet to give a final commitment. There needs an "independent mechanism" to look after this revenue loss and compensation issues.

The government has missed several deadlines to introduce GST. If implemented, it will subsume most of the indirect central and states taxes, duties and service taxes. Both the states and the Union government will impose GST on almost all goods and services produced in India or imported.

According to Modi, the parliamentary standing committee on finance is expected to submit its report on the GST Bill in a few weeks. However, he hinted the current United Progressive Alliance government with such a fractured majority might find it difficult to get the concerned constitution amendment Bill passed, as it will require a two-third majority.

"Once the parliamentary standing committee submits the report, I think, the matter needs to be taken up at a political level. An all-party meeting needs to be convened to discuss the matter," Modi said.

However, the Bihar deputy chief minister said there had been a concensus and the GST should come at one go in all states.

"No state can opt out from GST, whenever it gets implemented."