GST bill likely in budget session, no pact on kickoff

GST bill likely in budget session, no pact on kickoff
The Economic Times, January 8, 2010, Page 9

Deepshikha Sikarwar, ET Bureau, NEW DELHI

The Government may introduce a legislation in the budget session of Parliament to make necessary constitutional amendments and facilitate the launch of the goods and services tax (GST) although the rollout of this comprehensive indirect tax reform from the scheduled date of April 1, 2010, seems unlikely.

"The legislation has been finalised and the attempt is to introduce it in the budget session," a government official privy to the development told ET. This will come up for discussion at a meeting of the empowered committee of state finance ministers and union finance minister Pranab Mukherjee on Friday which also will deliberate the new date for the launch of the tax.

The joint working group set up to formulate the constitutional changes has already finalised the draft of the legislation. The working group had representation from the union finance ministry, state governments and empowered committee of state finance ministers.

Constitutional amendments are required for a rollout of GST as states need to be empowered to levy and collect tax on services. At present, the power to levy this tax rests with the Centre. Similarly, the Centre needs the authority to levy and collect tax on trade and levy of GST on imports.

"Tomorrow (on Friday) we will discuss the new date for introduction and compensation formula to the states with the Union Finance Minister," empowered committee of state finance ministers chairman Asim Dasgupta told reporters after a meeting of the panel on Thursday.

States have to be compensated for any loss in revenue on account of the rollout of the tax. Nearly all the taxes levied by the states will be subsumed under the GST and some states could end up losing revenue under the sharing formula.

The Centre and states are yet agree on the nitty-gritty of the tax structure owing to persistent differences on crucial areas such as turnover threshold limit at which the tax will apply. In fact, BJP-ruled states want implementation of the tax only from April 1, 2011. Most states are also against a mid-year launch as it could make the switchover to new regime difficult for traders.

The GST legislation will have to be approved by Parliament for Central GST law and also by the 32 states assemblies to facilitate state GST. "It is very difficult to roll the tax from April 1, 2010 in view of these practical difficulties," a state government official said. The GST, which will replace the major indirect taxes—excise duty, service tax, valueadded tax and other state taxes—with a single levy, will create a national common market at present fragmented because of multiple levies .

TAX VEX

Empowered committee of state fi nance ministers to deliberate on the new date for the launch of GST . The joint working group set up to formulate the constitutional changes has already fi nalised the draft.

Constitutional amendments required for GST rollout as states need to be empowered to levy and collect tax on services. At present, the power to levy this tax rests with the Centre. Similarly, the Centre needs the authority to levy and collect tax on trade and levy of GST on imports. GST legislation will have to be approved by Parliament for Central GST law and also by the 32 states assemblies to facilitate state GST

States have to be compensated for any loss in revenue. Nearly all the taxes levied by the states will be subsumed under the GST & some states could end up losing revenue under the sharing formula

The Centre and states are yet agree on the nittygritty of the tax structure. Most states are against a mid-year launch as it could make the switchover to new regime diffi cult for traders.