Pranab asks States to quickly resolve pending issues on GST

Pranab asks States to quickly resolve pending issues on GST
The Hindu Business Line, June 12, 2009, Page 15

— Ramesh Sharma

No meeting point yet: The Union Finance Minister, Mr Pranab Mukherjee, with the Ministers of State, Mr Namo Narain Meena, and Mr S.S. Palanimanickam, during a pre-Budget meeting with the State Finance Ministers , in the Capital on Thursday.

Our Bureau

New Delhi, June 11 The Union Finance Minister, Mr Pranab Mukherjee, on Thursday urged all the Chief Ministers and Finance Ministers of States to “expeditiously” resolve the pending issues concerning goods and services tax (GST) implementation, stating that this proposed new tax system was a critical part of the economic reforms.

Addressing a conference of Finance Ministers of States as part of pre-budget discussions, Mr Mukherjee asked them to focus on the introduction of GST from April 1, 2010. This statement is seen as a reaffirmation of Centre’s intent to help usher in GST from that date.

However, there are still various issues that need to be tied up at the level of States. Many States including some BJP-ruled ones have today expressed reservations on the proposed new system. Some of them have raised issues on compensation for revenue loss, design, etc.

Missing consensus

The current thinking in the Empowered Committee of State Finance Ministers, which had been tasked to design the GST framework in consultation with the Centre, is to have a system of dual GST— a Central-level GST (subsuming central taxes such as excise and service tax) and a State-level GST (subsuming VAT, octroi, entry taxes, etc).

Both the Centre and the States are yet to arrive at a consensus on how the dual GST should be administered and assessed — whether it would be a single authority (Central or State) or would it be multiple authorities, that is a Central authority looking after Central GST administration and a State authority (existing VAT department) administering and assessing the State GST.

On their part, some industry associations are pushing for a single unified national level GST that would be administered by a single authority. Only then, feel industry captains, the GST benefits could be well harnessed.

Industry view

At today’s meeting, Assam has submitted to the Centre that any loss arising to the State on account of adoption of GST should be fully compensated on a permanent basis. Currently, the Centre is willing to provide compensation for revenue losses for GST implementation only up to five years.

“We do agree that GST should be implemented. Its implementation would lead to permanent revenue loss for us. They said they will give compensation but only for five years. We have pointed out that revenue loss would be a permanent one. So, there should be full compensation and on a permanent basis,” Mr Tarun Gogoi, Assam’s Chief Minister, told reporters here.