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GST in rough weather again, implementation by 2013 unlikely
July, 16th 2012

"There are lots of issues which have not been resolved in GST.... we are nowhere near IT infrastructure which has to be in place, it is important for implementation of successful GST" Gujarat minister of state for finance Saurabh Patel said after the meeting of empowered committee of state finance ministers in Delhi on Friday.

The goods and services tax, which will replace most of the indirect taxes with one single levy, was to originally rollout from April 1, 2010 but has been delayed because of the opposition from states.

"I don't think implementation of GST from April 2013 is possible. There are many hurdles in between-...Many states have concerns about the constitution amendment bill particularly on the issue of state autonomy," Madhya Pradesh finance minister Raghavji said after the meeting.

The government was still hopeful of building a consensus. "I am sure it will be resolved soon," home minister P Chidambaram told reporters in Chandigarh.

"If it's resolved, we may implement it by 2013. Empowered group of state finance ministers headed by Sushil Modi is working on it," he added. Compensation to states in lieu of the reduction in central sales tax is proving to be another thorny issue that has the potential of derailing the centre-state talks on GST.

"States are angry, they are agitated. We have urged the Prime Minister to resolve the issue by August 7. There are about 20 days and we hope he (Singh) will resolve the issue," Sushil Modi, Bihar deputy chief minister and chairman, empowered committee of state finance ministers told reporters.

When asked about next course of action if the issue is not settled by August 7, Modi said, "Executive Council will meet and decide." West Bengal Finance Minister Amit Mitra said states should be compensated for revenue loss on CST reduction till GST is implemented. "All the states are on the same page. CST issue must be settled...how can we go to GST when there is no trust on a issue like CST," Mitra said. States have received only Rs 6,393 crore as compensation for reduction in CST from the centre in 2010-11 against a demand of about Rs 19,000 crore. They have been told by the centre there would be no more compensation.

Modi said states are suffering losses due after reduction in CST rate to 2 per cent from 4 per cent and should be compensated as promised by the Union government.

The CST is collected by the centre and distributed among states. As a precursor to GST, centre and states had agreed to phase out CST from April 2007 over a period of three years and consequently CST rate was reduced to 3 per cent and then to 2 per cent.

The Empowered Committee had earlier suggested that the CST rate be reverted 4 per cent in case the centre is unable to compensate them due to financial constraints.

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