Some states may stay out of GST in beginning: Pranab

Assuring that the Goods and Services Tax (GST) will be implemented on the scheduled date of April 1, 2010, Finance Minister Pranab Mukherjee said that some states may decide to stay out of it in the beginning, like in the case when value-added tax (VAT) was implemented four years back.

Few states like Tamil Nadu, Madhya Pradesh and Chhattisgarh have opposed or expressed reservations on implementing this pan-India consumption-based tax as many of their concerns were not resolved.

When VAT was introduced in 2005, few states like Tamil Nadu did not join at the start. But later, all the states introduced it.

The finance minister hinted this route could be one way to resolve the current deadlock on rolling out GST.

Answering the various concerns of India Inc in a post-Budget interactive session with industry representatives, Mukherjee said that increased government borrowing was the need of the hour as the economic situation was still vulnerable and fiscal consolidation would take place in eight months or so.

“I can assure that the intention is not to crowd out the private sector from the markets. I have taken a calculated risk as I expect economic uncertainty to prevail for some time to come,” Mukherjee said.

Fiscal deficit for the current year has been estimated at 6.8 per cent compared with 6.2 per cent in the previous fiscal ended March 2009. Mukherjee announced a fiscal deficit target of 5.5 per cent in 2010-11 and 4 per cent in 2011-12.

Finance Secretary Ashok Chawla later told reporters that the fiscal deficit of 6.8 per cent was a matter of concern, however, it would be lesser than the deficit of last fiscal because an unaccounted deficit of 1.8 per cent had occurred last year owing to the issue of oil and fertiliser bonds.

“This year, we do not anticipate issuing bonds as enough cash has been provided for oil and fertiliser subsidy in the Budget itself. Therefore, it is not that the fiscal deficit is on the rise,” said Chawla.

Mukherjee also said that the demands of Indian hotel industry, hit severely due to adverse global economic condition would be reconsidered in the coming months.

“There is case, to whatever extent, I can provide any incentive to this sector,” he added.

To the industry concerns regarding no definite road map provided in the Budget regarding disinvestment, Mukherjee said the government would wait for the right time to start the process of disinvestment and would start by selling stakes of listed public enterprises.