FM flexibile on GST, all issues will be resolved soon Modi

Convergence on lot of issues on which there was congrontation between Centre, states

The stalemate between the Centre and the states over the proposed Goods & Services Tax (GST) appears to be ending with the finance ministry showing some flexibility. The two sides are planning to resolve their differences in the next two or three meetings.

After a meeting with Finance Minister P Chidambaram today, Empowered Committee of State Finance Ministers’ Chairman Sushil Modi said he was very flexible over the contentious issues of compensation to states for loss in revenue, flexibility to alter the rates in GST, and fiscal autonomy.

“He seemed to agree with the issues of the states. We are moving forward in the right direction. There is convergence on many of the issues on which there was confrontation between the Centre and states. In the next two or three meetings we will able to sort out all the differences,” Modi told reporters.

He said there was an agreement among states that there should be floor tax rate with a narrow band and that a package should be considered for rewarding the states participating in GST. The states have also told the Centre that there is no need for a dispute settlement authority in GST. Chidambaram will meet the full empowered committee on November 8 to resolve all the issues.

So far the Centre was proposing fixed rates for GST across the country. A band giving leeway to the states for some maneuvering in the time of emergency may pave the way for amendments to the Constitution by next year.  However, even after these amendments, GST bills are to be framed and passed by Parliament and respective state assemblies.

A huge deterrent in the way of GST is compensation to states for the loss of revenue on account of Central Sales Tax (CST). States, which pegged their CST losses at Rs 19,000 crore for 2010-11, had threatened to derail the GST if the government did not agree to compensate them.

“We are trying to find ways on how to compensate states for loss of revenue that occurred to states due to reduction in CST from 4 to 2 per cent. I hope in the next meeting of the finance minister with the empowered committee will be able to find some solution,” Modi added.

The meeting was also attended by Unique Identification Authority of India (UIDAI) chairman Nandan Nilekani who is heading the panel for rolling out technology platform for GST. During the meeting, Nilekani said a Chairman for GSTN would be appointed soon.