Now, states cannot opt out of GST: Sushil Modi

GST is getting delayed due to differences between Centre and states over compensation for Central Sales Tax

Bihar Deputy Chief Minister and Chairman of Empowered Committee of State Finance Ministers on Goods and Services Tax (GST) Sushil Modi today said the option for the states to opt out of the proposed new taxation regime no longer exists.

"Earlier, there was a recommendation by one of the sub-committee on options for states to join or not to join. But now, there is near unanimity that this will not benefit many states...Now, that option (of not joining) has been withdrawn," he said, speaking at an event organised by industry lobby Ficci here.

"Either all states should join or not join," said Modi adding "Now, there is general consensus that whenever GST comes, all the states will join".

GST, a major tax reform, is getting delayed due to differences between the Centre and the states over issues like design and compensation for Central Sales Tax. It was originally scheduled to come into effect from April 2010.

Asking the Centre to provide fiscal incentives to states for joining GST, as is being done in other countries, Modi said 80 per cent of the issues have been sorted out.

He, however, declined to give a timeline for likely implementation. "The ball is in Central Government's court and we cannot blame anybody for delay," he said.

He pointed out that the 115th Constitutional Amendment Bill, pending for three years with the Standing Committee on Finance, will have to be cleared first.

"We came to know that very soon, they are going to submit their report. It is for the Central government when they want to present it in Parliament. This is one part of GST."

Additionally, a robust information technology infrastructure would be needed for GST implementation, he said, adding that a Centre-constituted committee, headed by Nandan Nilekani, is looking into this aspect.

Apart from that, the three sub-committees looking into "nitty-gritties" like revenue and dual control will try their best to submit reports at the full panel meeting in Mussoorie on May 10 and 11, he added.

The GST, among other things, seeks to subsume sales tax, service tax, VAT and Octroi.