State FMs' next meet on GST not to discuss Constitution amendment

The vexed issue of amending the Constitution for rolling out the new Goods and Services Tax (GST) may not come up in the next meeting of the Empowered Committee (EC) of state finance ministers on December 6 here.

The committee has dropped the item from its agenda for the meeting and, instead, is to discuss the structure of the proposed indirect taxation regime. It will also take up the issue of compensation to states due to reduction in Central Sales Tax.

Sources said taking the item off the agenda was intended to break deadlock on the GST, since the issue of a Constitutional amendment had derailed the talks, not only between the Centre and the states, but also created a divide of opinion among the states. Some states have said they should first finalise a structure.

The Centre, however, wants to keep the proposed amendment on a priority because getting the Bill through Parliament is long process. With talks on the GST structure back on the agenda, the Constitutional amendment may take a back seat and the government may fail to table the Bill in the next Budget session, too. Top finance ministry officials have already said the next GST rollout deadline of April 11 would be missed, but a further delay in Constitutional amendment may spoil the chances of introducing GST even from October 2011.

On Tuesday, Finance Minister Pranab Mukherjee had told the Rajya Sabha in a written reply that it was not possible to indicate a time limit for introduction of the Constitution Amendment Bill as “developing consensus on such issues generally takes time”.
 

BREAKING THE DEADLOCK

* The issue of Constitution amendment for GST has derailed the talks several times earlier

* The committee has dropped the issue from the agenda to break the deadlock

* Instead, the structure of the proposed indirect taxation regime would be discussed

* The committee will also take up the issue of compensation to states due to reduction in Central Sales Tax

* With the Constitutional amendment put on the back burner, the government may fail to table the Bill in the Budget session of Parliament

* Delay in Constitutional amendment may spoil the chances of introducing GST even from October 2011

Since June 21, when the Centre gave its proposals to the states on amending the Constitution for a GST, the EC has met four times to discuss it, but talks have not progressed. During these five months, the Centre also revised the draft to address concerns of the states, but could not succeed in doing so.

In the last meeting in Goa, on October 29, EC chairman Asim Dasgupta brought along some suggested changes to the Centre’s draft. He suggested alternative models for a Constitutional amendment. Under the first one, he proposed setting up a GST Council and Dispute Settlement Authority under Article 279A and 279B of the Constitution, respectively, and giving flexibility to the states in times of economic exigencies and natural calamities. The option was to omit these Articles from the Constitution.

Some states favoured a phased approach for amending the Constitution, while some others states, mainly those ruled by Congress party, insisted on making all the amendments in one go.