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Finance Minister: On Goods and Service tax, hope for consensus
December, 15th 2010

Finance minister Pranab Mukherjee said the Centre is willing to accommodate states concerns to ensure speedy implementation of the proposed goods and services tax.

This is an indication that the Centre may make another attempt to break the logjam in talks on the constitutional amendment needed to implement the countrys comprehensive indirect tax reform. The central government , with a view to evolve a consensus , is willing to consider a phased approach for the introduction of GST, Mr Mukherjee said in his address at a seminar organised by the Comptroller & Auditor General of India.

The GST is already delayed by a year and will miss the new deadline of April 1, 2011 because of the lack of consensus between the Centre and the states.

It will replace multiple indirect taxes levied by the Centre and the states with a neat single levy, which will help reduce administrative costs, create a national market and prevent evasion.

The single tax will subsume statelevel value added tax, octroi, entry tax and central taxes including excise duty and service tax.

It will not only dismantle the complexities and non-transparency in tax regime for goods and services but also encourage a consumerfriendly product pricing that should benefit the aam admi, Mr Mukherjee said.

Mr Mukherjee said the government would like to implement the new tax together with the new Direct Taxes Code from 2012-13 , which is slated to replace the archaic Income Tax Act, from April 1, 2012. It is my earnest hope that there will be a convergence of views on this draft so that the required bill for making these amendments could be introduced in Parliament at the earliest , he said.

The states have in principle agreed with the need for a reform in the regime for indirect taxes, but fear the structure proposed by the Centre will undermine their fiscal autonomy.

The empowered committee of state finance ministers has been unable to formulate any consensus on the Centre's proposal on constitutional amendment bill necessary to roll out the tax.

Some states, mainly BJP-ruled , are opposed to the Centre's proposal for creation of a dispute settlement mechanism through constitutional amendment.

The finance minister said in a multi-party , multi-ethnic country like India, divergent views are bound to occur and hoped that consensus would be found in the empowered committee over the issue.

Constitutional amendments are required to implement GST because the Centre cannot impose tax on retail sale of goods and states do not have powers to levy service tax. The proposed GST is to have two components, one central GST and one state GST.

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