State FMs to discuss GST today

Difference of opinions on the introduction of the Goods and Services Tax (GST) from April 2010 is likely to surface tomorrow at a meeting of empowered group of state finance ministers again.

Senior finance ministry officials said reservations of the states were more on political lines than on actual impact on their revenue since the GST regime is expected to be ‘revenue-neutral’ for both the Centre and states.

Opposition to the proposed GST is likely to come particularly from the BJP-ruled states. A Gujarat government official said the state had reservations on the impact of the GST on its revenues.

“Our doubts have been conveyed during the last meeting of the committee. The stand would remain more or less same,” he said.

Besides the BJP, the Union government is facing doubts expressed by its own ally DMK, which rules Tamil Nadu. It has not only said that the April 2010 deadline is “premature” but has also questioned the constitutional validity of the empowered group to discuss introduction of the GST.

The group was formed to see the transition into the value added tax (VAT) regime that had replaced sales tax and tried to bring uniformity among states. After the introduction of VAT, the group continued with the responsibility of tackling the roadmap for GST besides other teething issues about VAT.

Chhattisgarh and Madhya Pradesh have also expressed reservations on GST.

While Chattisgarh chief minister Raman Singh in a letter to prime minister Manmohan Singh earlier this year said the estimate of revenue loss to states have not been made yet, Madhya Pradesh chief minister Shivraj Singh Chauhan said the introduction of GST would lead to increase in tax burden for small industry and compliance cost for the government.

Countering criticism, the finance ministry official said, “The GST regime will increase the tax base and revenue for the governments. Just as in the case of VAT, there may be initial opposition from the states but they are likely to fall in line slowly.”