State FMs want Centre to adopt flexible approach to GST

The Chairman of Empowered Committee of State Finance Ministers, Sushil Modi, today said the Centre will have to adopt a flexible approach to ensure timely implementation of the GST, a new indirect tax regime.

"As this is a Constitution Amendment Bill, the central government will have to be flexible and will have to address all the concerns of the state governments," Modi told reporters after the meeting of state finance ministers here.

The Centre proposes to introduce Goods and Services Tax (GST), which will subsume central and state taxes like excise, customs, service tax, sales tax and VAT, by April 1, 2012. The introduction has been pending for years in the absence of political consensus.

Asked whether it would be possible to introduce the new tax regime from April 1, 2012, Modi said, "I am optimistic that if the way things are going, and if everybody cooperates, then we can catch the timeline also."

Modi, who was last month elected new chairman of the Empowered Committee of State FMs, said the panel has decided to ask for compensation for the loss on account of phasing out of Central Sales Tax (CST) for 2010-11 and 2011-12 fiscal.

"Earlier the compensation was envisaged for three years but because of the delay in GST implementation we require a compensation further for 2010-11 and 2011-12. That was the main issue we discussed," he added.

He said the committee would meet again in the last week of September or the first week of October to discuss the Constitution Amendment Bill, which is lying with the Parliamentary Standing Committee on Finance.

"In next meeting, states will give their opinion. We will be discussing the Constitution Amendment Bill threadbare and then we will meet with Standing Committee on Finance and we will put forward the views of the Committee," Modi said.

The main concern of the Opposition-ruled states is that the new tax regime would erode their autonomy to levy taxes.

BJP-ruled Madhya Pradesh, Gujarat, Himachal Pradesh and Chhattisgarh have so far opposed Goods and Services Tax (GST). GST Constitution Amendment Bill is pending before Parliament.

A Constitution Amendment Bill on GST was introduced in the Lok Sabha in the Budget Session and then was referred to a Parliamentary Standing Committee on Finance.

The first three drafts of the GST Bill were rejected after various states raised concerns over their autonomy.

In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part of the Amendment, will be decided by Parliament, sources said.

Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft.