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Centre proposes major shift in stance on GST
August, 22nd 2012

There may be fresh headway in pushing ahead with the proposed Goods and Services Tax, delayed so far by a variety of reasons including bickering between the states and centre on such matters as the compensation for the end of central sales tax as well as the constitutional implications of the centre's proposals.


The Finance Ministry has responded to some of the concerns posed by the Standing Committee of Finance and sought to break fresh ground on key issues, reports CNBC-TV's Siddharth Zarabi.

The 115th Constitution Amendment on the Goods & Service Tax is being vetted by the Yashwant Sinha led Standing Committee of Finance in Parliament. The panel, which has held extensive discussions with a variety of experts as well as the Finance Ministry, has raised several issues with respect to the proposed tax reform. And now the Ministry of Finance has got back to the Panel with its response on crucial matters like CST compensation.

Sources have told CNBC-TV18 that this could signal a shift in stance by the ministry, which is now headed by Finance Minister P Chidambaram.

For starters, the Finance Ministry has now indicated that it is willing to work out a detailed understanding on the issue of compensation in the run up to its advent.

What is a commitment is the Centre deciding to drop a controversial clause in the GST Bill. The Finance Ministry has indicated that it will withdraw the power of the Union to levy any surcharge on taxes. This, the Ministry feels, will ensure no disparity in powers between states and the centre.

On the larger issue of whether the Bill itself would alter the basic structure of the Constitution and whether the Law Ministry's views had been sought in this regard, North Block's response is that it has sought a fresh opinion on this matter. This even as the Attorney General of India had earlier said that not only does the amendment bill not impact the Constitution, but instead strengthens it.

But the Finance Ministry is not willing to consider ground on some other aspects and may well push for a rethink on some issues. Accordingly, the Centre has made it clear that it GST cannot be implemented in a staggered manner.

It is also making it clear that entry and entertainment tax cannot be excluded from the purview of the tax and would instead want items like petroleum, alcohol and real estate to be included in the tax

The question is, will all of this help break the logjam and help in ushering in this tax reform? Only time and perhaps P Chidambaram can answer the question.

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