On GST, Govt and the opposition fail to end a stalemate
December, 07th 2010
The government and the opposition failed to end a stalemate over the proposed goods and services tax, with a meeting of state finance ministers on Monday deciding not to discuss the constitutional amendments required for the implementation of the key indirect-tax reform.
GST has become a political issue and senior leaders of both the Congress and the BJP should discuss it to break the deadlock, Haryana Finance Minister Ajay Singh Yadav said.
The government had planned to roll out GST from this fiscal year, but postponed its implementation by a year. The new tax is aimed at harmonising the countrys indirect tax regime by replacing several taxes levied by the Centre and states. Only eight state finance ministers out of 28 attended the meeting that postponed discussion on the constitutional amendment bill to its next meeting later this month. Finance ministers of BJP-ruled states did not attend the meeting.
Talks need political energy now, said a government official present at the meeting . Asim Dasgupta, the chairman of the empowered committee of state finance ministers, downplayed the absence of the ministers.
Many of them are having their winter sessions, but their officers did attend the meeting, he said.
The GST will replace central excise duty and services tax and state taxes including value-added tax, entry tax and purchase tax.
Lack of political will and consensus on the constitution amendment bill make GST rollout difficult next fiscal. This is bound to have an impact on the feasibility of introducing GST at an early date," said Prashant Deshpande, leader, indirect tax, at consultancy firm Deloitte .
Constitution has to be amended to allow Parliament and state assemblies to tax same items. At present, the Centre can impose tax on goods at the factory gate and services while states can only tax goods at retail level. States do not have the power to levy tax on services.
Mr Dasgupta said the panel will discuss the states views on the bill with Union finance minister on December 15. States are opposed to the creation of a GST council and a dispute settlement mechanism, proposed in the constitution amendment bill.
He said Monday's meeting discussed three issues --changes to GST structure, a 30% growth in valueadded tax collections by states, and compensation to states for central sales tax reduction.