States Reject Draft Bill On GST

New Delhi :  States rejected on Wednesday a draft bill on Goods and Services Tax over a clause giving the Centre power to veto their decisions, even as Finance Minister Pranab Mukherjee sought their cooperation
states reject draft bill on gst - India TV
PTI 04 Aug 2010, 05:14 PM IST
New Delhi :  States rejected on Wednesday a draft bill on Goods and Services Tax over a clause giving the Centre power to veto their decisions, even as Finance Minister Pranab Mukherjee sought their cooperation for passage of the tax reform.  States feared that giving veto power to the Union Finance Minister on state GST would dilute their fiscal autonomy.

 "This proposed draft Constitutional amendment bill related to GST in its present form is not acceptable to the states... States in general have reservations about the Union Finance Minister having any veto power on state GST," Empowered Committee of state finance ministers Asim Dasgupta told reporters here.

The rejection came within hours of Union Finance Minister Pranab Mukherjee appealing in Parliament to Opposition parties and states for their cooperation to implement GST from next fiscal, saying this indirect-taxes reform measure would help arrest fluctuation in the general price line.

GST will replace the excise duty and service tax at the Central level and value-added tax at the state level, besides the cess, surcharges and local taxes. Some BJP-ruled states expressed doubts whether at all GST would be introduced from next fiscal.

Dasgupta said states are against infringement on their financial autonomy and have certain reservations on the draft bill's provisions for the GST Council and the GST Disputes Authority. He said Union Finance Minister, of course, would have an exclusive authority with respect to central GST.

The states also feel that GST Disputes Authority should not find a place in the Constitutional amendment bill and may be incorporated in GST legislations.

"So, how to handle a situation where state GST and central GST would be there will have to be appropriately and acceptably handled," he said.

In Parliament, Mukherjee said: "The bill (for constitutional amendments) has to be introduced in this session, has to be examined by the Standing Committee, it has to be ratified by 15 states. Otherwise, there will be another delay ... I seek cooperation of the entire House."

Mukherjee said GST would help curb volatility of prices in items and sought the Opposition's help to even include petrol in the proposed GST regime so that its prices do not fluctuate much in the domestic market.

Dasgupta said a second discussion paper on GST may be needed. The first discussion paper proposed to keep petroleum products out of GST.

Last month, Finance Minister Pranab Mukherjee proposed a three-rate structure for GST -- 20 per cent for goods, 12 per cent for essential goods and 16 per cent for services, to be imposed by the Centre and states in equal percentage.

The differences between the Centre and states over GST structure has already delayed its introduction by a year. Against this financial year, it is now proposed to be introduced from 2011-12. When asked whether states' position will delay introduction of GST from next fiscal, Dasgupta said, "I did not say that."

However, some BJP-ruled states are not as optimistic about rolling out GST from next fiscal. "It is impossible to introduce GST from April next year," Madhya Pradesh Finance Minister Raghavji said.

Mukherjee, while seeking the Opposition's support for roll out of GST, also pointed out that BJP in its own manifesto in the last Lok Sabha elections had promised to roll out GST. PTI
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