'Centre yet to address states' concerns over GST'

Last Updated: Sat, Jun 02, 2012 18:40 hrs

The Centre is yet to address the concerns of states on the proposed Goods and Services Tax (GST) regime, particularly those related to fiscal autonomy, Chairman of the Empowered Committee of State Finance Ministers Sushilkumar Modi said on Saturday.

He also asserted GST would help increase India's gross domestic product by 1-1.5%, create further conducive atmosphere to do business in more easier way and make manufacturing goods competitive.

"We are inching towards GST, but not very fast. The Centre needs to address the concerns of the states to ensure its rollout. Moreover, the ongoing political uncertainties at the Centre may also create some hurdles," Modi said addressing a seminar on GST.

Calling for more interaction between the Centre and the states to resolve the differences, Modi said the government is yet to assure the states on fiscal autonomy, powers to fix tax rates and impose levies, compensating them for revenue loss and establishing a dispute settlement authority.

"The major concern is with regard to fiscal autonomy. Some states are of the view that the constitutional amendment will take away their fiscal autonomy," he said.

Modi, also the deputy chief minister of Bihar, said the Parliamentary standing committee on GST is expected to submit final report before the Monsoon Session. "One of the major obstacles has been crossed as the Parliamentary Standing Committee on Finance will start deliberations from June 8 on the GST Constitutional Amendment Bill. Committee chairman Yashwant Sinha has assured me to complete deliberations and prepare the report before the Monsoon session," he said.

He, however, refused to set a deadline for GST rollout, saying, "I can't give you a deadline on GST implementation as the states have many apprehensions about the actual import of the new common tax regime."

Modi also expressed displeasure over the Centre for not meeting its commitment to compensate states for their losses arising from halving the Central sales tax or CST. "So far the Centre has given only Rs 6,000 crore in compensation to the states against an actual loss of Rs 19,000 crore last financial year," he said.

In the run-up to the GST rollout, the Centre had planned to phase out CST and slashed the rate of CST from four to two per cent with a promise the states would be compensated for the loss arising out of reduction in CST rate. But with the Centre's own finances under pressure, it has not been able to do so.

Modi said the states have suggested standard and lower rates and that there be a floor rate with a narrow band of two to three per cent like the European Union. He said the states have serious concerns over the proposed Article 279 B on GST dispute settlement authority as they are more comfortable with the proposed GST Council headed by the finance minister and one representative of the Centre and the rest from the states vested with powers to resolve disputes.

"Any dispensation involving multiple partners does require a mechanism to resolve disputes and a provision can be made empowering the GST Council to decide about the mechanism to resolve disputes arising from its recommendations," he said.

On the apprehensions of revenue loss arising out of GST, Modi recalled that similar concerns were voiced at the time of introduction of value added tax (VAT).

However, VAT vastly increased revenues of the states, going up from 12-13 per cent pre-VAT to 24-30 per cent.

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