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Main premise of the states opposing the GST Bill
October, 05th 2010

Despite persistent opposition to Goods and Service Tax (GST) Bill, the Union government has taken no initiative so far to make amendments as suggested by the state government. The main premise of the states opposing the GST Bill is that it will usurp most of their rights and render them as mere beggars before the Central Government.

Recently, Madhya Pradesh Chief Minister has reiterated the state government's stand, saying that the state cannot go before Centre with the begging bowl every time it will need funds. He made it clear that if the Centre didn't bring about changes in the GST as per the state government's suggestions, it will not pass the GST Bill in the state assembly here.

In fact, Madhya Pradesh cannot afford to accept the way GST has been presented, as the same will cripple the state's own revenue generation system. As a matter of fact, if the basic form of GST is not changed in tune with the aspirations of the MP, the GST bill will not be passed in the state assembly.

It may be mentioned that the way the GST Bill has been structured; it will put an extra burden on the poorer sections as the rate of taxes will lead to hike in the price of the essential commodities.

Another concern of the state governments is that GST will also limit the taxation powers of the state, which will ultimately affect its financial autonomy as the state will become dependent on the Centre for e finances.

Furthermore, the GST will also affect the federal structure of the country, leaving states with very few powers. Significantly even the Congress-led state governments have expressed their reservations on the GST.

Under the amendments to GST Bill proposed by Madhya Pradesh, it was suggested that Centre should tax services, while the states be allowed to tax all goods up to the retail stage the. MP government had reasoned that this model of GST would obviate the need for constitutional amendments.

However Centre has rejected alternative GST proposed by MP, Gujarat and the chairman of the empowered committee of state finance ministers. Under the GST, a single tax will have two equal components, one levied by the Centre and the other by states. The rolling out of GST requires some constitutional amendments, which need to be passed by both the houses of Parliament and at least 15 state assemblies.

Despite changes in the GST draft, many states have been opposing GST. Even after the revised draft of GST that incorporated withdrawal of the veto power and a more equitable sharing of powers, still the opposition by many states especially MP persisted in the meeting of the empowered committee of state finance ministers on September 20. Sources said that the GST Bill would be tabled in the winter session of Parliament if consensus emerges among the states by October 27 meeting of the empowered committee in Goa.

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