GST remains far cry as BJP-ruled states stick to demands

Despite the finance minister holding out hope for early implementation of GST, Madhya Pradesh and Gujarat still stand opposed to it

The BJP-ruled states may pour cold water on Finance Minister P Chidambaram’s plan to roll-out the Goods & Services Tax (GST) before 2014 general elections.

Despite the finance minister holding out hope for early implementation of GST, the states like Madhya Pradesh and Gujarat still stand opposed to it.

The two sub-committees, which were set up by the government to sort out the contentious issues of compensation to states for loss of revenue due to reduction in central sales tax (CST) and the final design of GST, are also likely to miss the December 31 deadline for submitting their reports.

Madhya Pradesh Finance Minister Raghavji said his state would support GST provided the Centre agreed to a model suggested by it.

Madhya Pradesh is insisting that the states should be allowed to collect service tax and the Centre should not get into areas already taxed by the states.

GST, however, is expected to be a both central and state tax on the common pool of goods and services with some flexibility.

Raghavji, along with other states, is also asking for more flexibility in altering with the tax rates, while the Centre wants a uniform GST rate across the country so that distortions don’t arise.

A state finance minister said there has not been much headway in the yalks between the Centre and the states over GST and the sub-committees might be given more time to complete their reports.

“Few officials from the Centre and the state government can’t decide the design and roadmap for GST over a couple of meetings,” said the state finance minister.

Asked whether some consensus has been reached between the Centre and the states over some areas in GST after Chidambaram took charge of the finance ministry in August this year, he said, “Nothing has changed.”

The two sub-committees were set up after the first meeting of the Empowered Committee of State Finance Minister with Chidambaram on November 8.

The two sides are expected to meet again in January after the committees submit their report.

Chidambaram's statements regarding early passage of the Constitutional Amendment Bill and introduction of GST legislation by the end of this financial year have made everyone hopeful that the new indirect tax regime might see the light of the day before the country goes for general elections in 2014.

To a query, he had said,"...we can get the GST Bill by the end of this financial year.”

Parliamentary Standing Committee on Finance, headed by BJP leader Yashwant Sinha, is yet to submit its report on the Constitution Amendment Bill for GST. States have concerns over some of the provisions of the Bill and if the finance ministry wants to address those it would have to make changes to the Bill which is required to be passed by two-third majority in each house of Parliament and then at least half of state assemblies need to ratify it.

The Mid Year Economic Analysis tabled in Parliament this month said a discussion paper on key concepts underlying GST is being finalised.

The drafting of model GST legislation for the Centre and the states will be taken up after the discussion paper is finalised.

The original date for rolling out GST was April one, 2010.