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Rollout of Goods and Services Tax in sight, at last
August, 04th 2011

The election of Bihar Deputy Chief Minister Sushil Modi as Chairman of the Empowered Committee of State Finance Ministers on GST (Goods & Services Tax) appears to have removed a political roadblock and paved the way for the rollout of the much-delayed indirect tax regime.

The panel is meeting on August 19 to discuss various issues that remain tangled in the way of implementing the new tax regime, which is expected to rake in higher revenue and add a few percentage points to the country's GDP (gross domestic product) growth.

After a meeting with Mr. Modi on Wednesday to chalk out a smooth implementation path for the GST regime, Union Finance Minister Pranab Mukherjee said: We discussed the future course of action and how the Empowered Committee will go ahead. On August 19, the panel members will discuss various issues among themselves [and] thereafter I am going to have an interaction with them.

According to Mr. Modi, the first meeting under his chairmanship would discuss the IT infrastructure required for the rollout of the GST, the CST (Central sales tax) compensation that the Centre has to pay the States and the Constitution Amendment Bill to facilitate GST rollout.

Though the Bill has already been introduced in the Lok Sabha and subsequently referred to the Parliamentary Standing Committee on Finance, there are several issues between the Centre and the States which remain unresolved. Among these are issues such as a provision for the States to levy cess in case of natural calamities, their fiscal autonomy and concerns pertaining to powers of the proposed dispute settlement authority.

At Wednesday's meeting, the two leaders discussed the State governments' concerns at loss of revenue as a consequence of reduction in CST rates. ... certain issues on the CST compensation [were also raised] on which I also shared my views and we will arrive at a decision shortly, Mr. Mukherjee said.

CST to go

The CST, a levy on inter-State movement of goods, was cut from four to three per cent in 2007-08 and further to two per cent in 2008-09 following implementation of the VAT (value-added tax) regime by the States. While asking all State governments to file their compensation claims for 2010-11 on account of CST reduction, the Centre plans to abolish the levy in phases to usher in the GST regime. So far Rs. 2,411 crore has been released to 10 States for CST revenue loss during the fiscal year.

Alongside, Chairman of the Unique Identity Authority of India and Empowered Group on IT infrastructure for GST Nandan Nilekani had a meeting with Mr. Modi. They discussed an initiative for centralised IT infrastructure for the GST across the States which can currently be used for VAT and be available for GST as and when implemented.

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