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Goods and service tax delayed, likely by 2011 only
December, 17th 2009

It's official: The goods and service tax (GST) regime, India's biggest-ever tax reforms attempt, scheduled to roll out on April 1, 2010, will miss the deadline by a wide margin.

After a meeting in the capital on Wednesday, chairman of the empowered committee of state finance ministers on GST, Asim Dasgupta, told the media that the draft amendment for the new tax regime would not be introduced in the current winter session of Parliament.

It may be difficult to introduce the goods and services tax amendment in this winter session due to certain difficulties, said West Bengal finance minister Daspupta.

If the amendment is introduced in the next Parliament session (Budget), GST cannot be implemented from April 1 as framing of the new legislation is a lengthy process, an empowered committee representative pointed out.

In fact, members of the committee have indicated that GST would not be implemented before the year 2011.

In the DNA Money edition dated November 11, it was reported that a one-year delay from the scheduled date of GST rollout was likely.

On Tuesday, the task force of the 13th Finance Commission released a report, recommending to defer the GST implementation by six months. The task force wants GST implementation only by October 1, 2010.

"Given the fact that the discussion paper on GST has not yet been released for public debate, it is unlikely that the Centre and the States would be able to complete all legislative and administrative processes before April 1, 2010," the 13th Finance Commission report said.

It added, "it would be appropriate for the Council (empowered committee) to postpone the implementation by six months to October 1, 2010."

Stressing on the need for strong political consensus and significant role of the finance minister, the Commission's task force report has pointed out that "the benefit to the poor from the implementation of GST will flow from two sources: first through increase in the income levels and second through reduction in prices of goods consumed by them."

The proposed switchover to the 'flawless' GST should, therefore, be viewed as pro-poor and not regressive, it has said. "Hence, the switchover will improve the vertical equity of the indirect tax system."

The 13th Finance Commission task force has recommended a single, 12 per cent rate, on all items.While states would get 7%, the remaining 5% would go to the Centre, according to the task force.

The discussion paper prepared by the Empowered Committee of state finance ministers had however suggested four rates under GST.

The Centre and states are still in consultation, and they are far from reaching a consensus on how to implement the ambitious GST scheme.

Besides the rates to be fixed for GST, the quantum of compensation to be paid to the states during implementation of the system is a thorny issue that needs to be resolved.
GST is being referred to as a comprehensive indirect tax reform in the country, just like value-added tax (VAT) was an improvement over the earlier system of central excise duty at the national level and the sales tax system at the state level.

Former finance minister P Chidambaram had announced April 1, 2010, as the rollout date for GST across the country in his budget speech of 2007-08.

Recently, finance minister Pranab Mukherjee had said, "we should look at a full-fledged rollout of GST. Let it take as much time as required."

The empowered group of state finance ministers is scheduled to meet again on January 7 and 8 to discuss the GST issue. The FM will then finalise the draft constitutional amendment in consultation with the committee.


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