GST: Pranab hopes for breakthrough

As states meet on Thursday to iron out differences over various aspects of the proposed goods and services tax, the Centre said it is hopeful of reaching a common ground on the new indirect tax system.

"Chairman of Empowered Committee is trying (to resolve the issue). I am hopeful that it is possible to have convergence of views," Union finance minister Pranab Mukherjee told reporters.

The Empowered Committee of state finance ministers is meeting under the chairmanship of West Bengal finance minister Asim Dasgupta to work out agreements on various aspects of the GST.

The states are yet to reach a favourable agreement on certain aspects of GST like rates, items to be covered and issues related to compensation to states that would lose out on their earnings, even as the  April 1, 2010, deadline for the introduction of the proposed tax draws closer.

While states have decided to have two main GST rates, besides one special rate for precious metals, the Centre is yet to take a call on it.

The proposed indirect tax regime would replace most of the indirect tax levied by the Centre like excise and service tax and subsume state-levied taxes like VAT and local taxes like octroi and purchase tax.

However, some states have reservations on doing away with the local taxes as that could impact their financial autonomy.

Also, dearth of data on the services sector with the states is posing problems in fixing the rates for services.

Some states like Madhya Pradesh and Gujarat have said that GST introduction should not be done in a haste.

Gujarat finance minister Saurabh Patel has written to Dasgupta that GST should not be implemented unless there is clarity on subsuming of cesses and surcharges levied by the Centre and on issues pertaining to purchase tax.

The Empowered Committee has also set up a group to suggest changes in the law and model GST legislation as its implementation would require certain constitutional amendments.

The joint working group on GST, that met on Wednesday, is expected to put forth its recommendations to the Empowered Committee at its meeting on Thursday.

Image: Pranab Mukherjee