Centre hopeful of GST nod at Oct 21 meet

The Union government is pushing states to agree to its proposed Constitution amendment Bill on a goods and services tax when the Empowered Committee of State Finance Ministers meets here on October 21.

The finance ministry also wants the EC to expedite work on the GST legislation. Release of Central Sales Tax compensation to states is part of the proposed bargain.

For 2013-14, the government had budgeted Rs 9,000 crore towards compensation to the states for losses on account of reduction in the CST rate but the money is yet to be released.

Finance Minister P Chidambaram has told the states they’d get CST compensation only in return for help in taking the Constitution amendment Bill and the GST legislation forward at a fast pace, said a ministry official.

Industry is putting pressure on the government to introduce a GST.

Though the rollout is not possible during the tenure of the current government, with a general election due in about seven months, Chidambaram is trying for passage of the constitution amendment.

It would be a feat, particularly at a time when the UPA government is getting flak for lack of big reforms.

Discussion on the constitution amendment tops the agenda for the October 21 meet.

The EC will consider a report of a sub-committee of states’ officials, set up in the previous meeting on September 19, to reconcile the recommendations of Parliament’s standing committee on finance, the revised draft of the Bill and states’ views.

If it does not propose any major changes that open another can of worms, the Centre will table a Bill in the winter session of Parliament, likely next month.

It would have to be passed by a two-third majority in both chambers and then be ratified by the legislatures of at least half the states.

The revised draft is broadly in line with the agreement between Centre and states in their January 2013 meeting at Bhubaneswar and recommendations of the standing committee.

The parliamentary panel, chaired by Bharatiya Janata Party senior Yashwant Sinha (himself an ex-finance minister), had suggested a floor and ceiling rate for GST, taking decisions in the GST Council by voting and not by consensus, and removal of a provision to set up a Disputes Settlement Authority, among others.

Some key areas on which states views would be crucial include inclusion of fuel and liquor in a GST and subsuming in it the entry tax.

Amendment to the constitution is needed to give power to the states to tax services and to the Centre to impose tax beyond manufacturing.

The next step is to introduce the legislation, which would lay down the design of a GST.

Once the constitution amendment is cleared, the Centre will move this in Parliament, while states will introduce the legislation in their respective Assemblies.

THE OCTOBER AGENDA CARROT

• Release of Rs 9,000-crore (Rs 90-billion) Central Sales Tax compensation to states

STICK

• Get states to agree to Constitution amendment Bill
• Push finance ministers’ panel to fast-track work on GST legislation

WHY AMEND THE CONSTITUTION?

• To give power to states to tax services; to enable the Centre to impose tax beyond manufacturing

WHAT NEXT?

• Introduce the legislation, which would lay down the design of GST
• After Constitution amendment is cleared, the Centre will move this in Parliament; states in Assemblies