Dec 12 2014 : The Economic Times (Delhi) Centre & States Move Closer to Bridging Differences on GST New Delhi: Our Bureau Only Maha, Guj holding out; FMs to meet again in a week The Centre and states made significant headway on the goods & services tax (GST) after a day of hectic parleys that went on until late Thursday night at the finance ministry . Implementing GST is one of the main measures on the Modi governments reforms agenda and is seen as a critical element in its efforts to speed up economic growth. State and central finance ministers and officials will meet again in a weeks time to try and clinch a deal, with the government having said that it wants to get the levy in place by April 1, 2016, a six-year delay . “We have made headway , but we will meet again in a weeks time,“ Jammu & Kashmir Finance Minister Abdul Rahim Rather, chairman of the empowered panel of state FMs, said after the meeting with Union Finance Minister Arun Jaitley on Thursday night. The government appeared confident of moving the amendment Bill needed to be passed before GST can be rolled out. The levy was to have originally been launched on April 1, 2010. “Most states are on board including Karnataka and Kerala. Only two manufacturing states have concerns of revenue loss that will be addressed,“ said a government source said privy to the deliberations of Jaitleys meeting with the three state finance ministers that were negotiating on behalf of the rest. These two states are Maharashtra and Gujarat, ruled by BJP. The official said the constitutional amendments are based on the minutes of the empowered committee meeting held in Bhubaneswar, indicating that states are on board in respect of the changes. GST seeks to create a seamless national market for goods and services by removing distortions caused by state fiscal policies and entry taxes that create geographical boundaries. It will also remove inefficiencies in indirect taxes by replacing the plethora of central and state levies with a single tax. There is a general political consensus on GST but a deal has been elusive because states have played hardball fearing loss of revenue. The same script played out on Thursday when states took a hard stand, prompting Jaitley to step in and make sure that progress could be made. States wanted compensation for any loss of revenue for five years, and petroleum and entry tax to be kept out of GST. “We have been discussing GST for the past seven years,“ Jaitley told the finance ministers, insisting that it was time to take a call on whether they wanted GST or not, a person aware of the deliberations told ET. Jaitley is very keen to introduce the constitutional amendment Bill in the current Parliament session that ends on December 24. The finance minister assured the states that all their concerns, including compensation for any revenue loss under the new tax re gime, would be met. “The prime minister has made it clear that this government believes in cooperative federalism...We want states to prosper... All states stand to gain from GST like they did from value-added tax,“ Jaitley told the state ministers. He asked the finance ministers to form an informal grouping representing producing states and consuming states to further discuss and finalise the contours of the legislation. Subsequently, Jaitley met Rather, Gujarat Finance Minister Saurabh Bhai Patel and Punjab Fi nance Minister Parminder Singh Dhindsa late in the evening. Rather did not elaborate on the nature of the progress. Hectic negotiations had begun on Wednesday between central and state officials to break the logjam. The talks appeared to go off rails with states seemingly unmoved by Jaitley having announced on the day before the release of Rs 11,000 crore to states as the first tranche toward compensation in lieu of the cut in central sales tax rates, a key stumbling block for years. Delays in release of the compensation had created a trust deficit between the Centre and states that Jaitley sought to address. “There is no consensus between the Centre and states on these three things (compensation issue, petrol tax and entry tax). The empowered committee is not supporting the Bill without these three things,“ Rather had said earlier. GST is Indias most far-reaching tax reform and aims to integrate the country into a common market by dismantling fiscal and geographical barriers between states. A National Institute of Public Finance and Policy team tasked by a sub-group of the empowered committee of state FMs to recommend a revenue-neutral rate has suggested as many as 16 rates of GST envisaging different scenarios. The rates suggested in the latest study are 14%, 16%, 20%, 24% and 27%. The final decision on this will be taken by the GST council to be constituted after the passage of the constitutional amendment Bill.
Posted on: Fri, 12 Dec 2014 07:17:04 +0000