Finance minister P Chidambaram and the Empowered Committee of state finance ministers on VAT are expected to lay a road-map for the Goods and Services tax (GST), scheduled to be implemented by 2009-10.
Adviser to Finance Minister Parthasarathi Shome today hinted that the Finance Minister and the VAT panel, which are currently working on phasing out Central Sales Tax (CST,) will also consider various challenges to implementation of GST, besides alternative GST models.
These challenges include conceptualisation of a GST model that will fetch adequate revenue to the Centre and states to meet the growing expenditure needs, ultimately introducing a common market across the country, he said while releasing an Assocham study - "GST: Imperative for Economic Growth."
"Even Prime Minister has indicated that we would be working toward GST," he said.
However, the Centre and states would have to agree whether there is a need for an amendment in the Constitution to introduce the GST.
Although, initially there was no specific provision for levying service tax by the Centre, but through Constitutional amendment, Centre has been empowered to tax services, or pass on that power to states to tax certain services with Parliament approval.
The Finance Ministry and the VAT panel would deliberate on whether GST could be introduced within these legal constraints, said Shome.