The Centre's latest draft on constitutional amendments to Goods and Services Tax (GST) implementation has again hit the political roadblock, with BJP-ruled states voicing opposition, while Congress-led governments supporting the proposals.
In its latest GST constitution amendment draft -- the third of its kind -- the Centre has proposed to give power to Parliament for constituting the GST council, a move vehemently opposed by the BJP-ruled states.
"This will destroy our fiscal autonomy, so we do not accept the constitution amendment bill for GST," Madhya Pradesh Finance Minister Raghavji said, after the state Finance Ministry meeting today on GST.
The proposed GST has been hanging fire, with all the three draft proposals been opposed by the BJP-ruled states.
Gujarat Finance Minister Saurabh Patel said, "The new constitution amendment draft proposed by the Government of India is retrograde in nature and completely against the fiscal federalism."
However, Haryana Finance Minister Ajay Singh Yadav said there has been lots of discussion on the issue and now it should be introduced in the Parliament.
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"We had lots of deliberation on GST constitution amendment. Now, the bill should be introduced in the Parliament. We want it to be introduced in the Budget Session."
The new draft proposed to create a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft.
The GST council would be a recommendatory body and it would give suggestion to the Union and the states on the indirect tax regime.
The constitution amendment is necessary as a number of taxes fall in the states' purview, while some come under the Centre's ambit.
Delhi Finance Minister A K Walia also supported the Centre's proposals and said that some states are opposing it on their party line.
Raghavji said there should not be state finance ministers' meeting on GST, unless there is consensus between the Centre and the states on the issue.
Last year, a draft constitution bill proposed by the Centre to states had suggested a council chaired by Union Finance Minister, with states as members to make changes in GST.
The states, especially the NDA-ruled one, had raised objections on the proposal on the plea that it would give veto power to Union Finance Minister over states taxation issues.
The Centre provided another draft to states, suggesting that changes in GST could be made only if there was consensus on those issues in the council. However, some state finance ministers did not agree to even this suggestion.
After missing the original April 2010 deadline for GST rollout, the government proposed to introduce it in April 2011. But it is all set to miss this deadline too.
The GST will subsume indirect taxes such as excise duty and service tax at the central level and VAT on the states front, besides local levies.
On the Central Sales Tax compensation issue, however, the states were almost united.
Yesterday, the Union Cabinet approved Rs 7,029 crore compensation to states for the losses they suffered due to reduction in central sales tax (CST) rate in 2010-11.
CST, a tax on movement of goods from one state to another, was reduced from 4% to 3% in 2007-08 and further to 2% in 2008-09 after the introduction of VAT, as it was considered distortionary.
Yadav called the compensation too little and said that most of the states were surprised by the package.
"The CST compensation is too little. Instead of Rs 16,000 crore, they have given Rs 7,000 crore."