Chidambaram woos states on GST

Last Updated: Thu, Jan 17, 2013 04:40 hrs

Finance Minister P Chidambaram today said he would outline Constitutional amendments for the Goods and Services Tax (GST) in his Budget speech if states arrived at a consensus on the issue. States, however, said a consensus on the proposed indirect tax regime still eluded them.

In a pre-Budget consultations with finance ministers of states, Chidambaram stressed it was time to wrap up loose ends on GST. He added even if states gave their consent just a few days before the Budget, he would make GST a part of his Budget speech, said an official present in the meeting.

In November, the finance minister had formed two committees to resolve the differences between the Centre and states on GST and Central Sales Tax (CST). It is expected the committees, which had missed the deadline of December 31 to give their reports, would now do so on January 21.

Madhya Pradesh Finance Minister Raghavji said at the meetings of these committees, no consensus had emerged so far. Fiscal autonomy of states was yet to be discussed, he added.

West Bengal Finance Minister Amit Mitra said though GST was part of his party's manifesto, when the Centre wasn't giving CST compensation, the state could not support GST. He said things could only move forward if the two committees agreed on a common GST structure.

Budget 2013-14 would be presented towards the end of February. The Constitution (Amendment) Bill is pending with the Parliament's standing committee on finance. The Bill would empower states to impose service tax and the Centre to impose levies beyond manufacturing.

However, it requires a two-third majority in each House of Parliament, as well as the assent of at least half the states.

After today's meeting, Bihar Deputy Chief Minister and Chairman of the empowered committee of state finance ministers Sushil Modi told reporters a meeting of the committee would be held in Bhubaneswar on January 28 and 29. At the meeting, recommendations of the two committees on issues related to GST would be discussed.

On the states' demand of more compensation for a cut in CST, they were told though the Centre wasn't against the idea, this would depend on the fiscal situation. Modi said all states had demanded compensation for a cut in CST from four per cent to two per cent.

Chidambaram said the Centre was committed to sticking to its fiscal road map, which stated its deficit should fall from 5.7 per cent of the gross domestic product in 2011-12 to 5.3 per cent this financial year. It also mandates the Centre to reduce the deficit to 4.8 per cent in 2013-14 and three per cent by 2016-17. To hasten investments, the finance minister asked states to give speedy clearances to projects in their jurisdictions.

Modi said states had demanded the implementation of the B K Chaturvedi committee's recommendations on schemes sponsored by the Centre. The panel had suggested the number of these schemes be cut. It had also sought flexibility for states on the use of these funds. States have demanded their contribution in central schemes shouldn't be higher than 15 per cent. Several states said while they favoured direct cash transfer of benefits, the banking network had to be expanded, especially in rural areas.

Another demand was states with good debt-to-gross state domestic product (GSDP) ratios be allowed to borrow up to four per cent of their GSDP, Modi said. The Fiscal Responsibility and Budget Management Act caps state borrowings at three per cent of GSDP.

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