The finance ministry plans to table a Constitutional Amendment Bill for introducing the Goods and Services Tax (GST) GST in the coming Budget Session of Parliament. The proposed regime to replace many existing indirect taxes levied by the Centre and states, has already missed deadlines twice and may come into effect from April 2012.
“The Centre and the states have now been engaged for almost four years in developing a roadmap for the rollout of GST... We have missed the timelines twice and it is my earnest request that we move expeditiously and introduce the Constitutional Amendment Bill in the forthcoming Budget Session,” Finance Minister Pranab Mukherjee said during his meeting with the Empowered Committee of State Finance Ministers today.
Finance ministry officials told Business Standard the Bill would be tabled in Parliament towards the later part of the Budget session, which starts on February 21. It will then be referred to a standing committee for scrutiny. Once the committee gives its report, the government should be in a position to get it cleared in the Winter Session (in December).
“After that it will have to be ratified by the legislatures of at least half of the states. So, the earliest date for GST introduction will not be before April 2012,” said a finance ministry official.
Earlier in the day, the Empowered Committee met to discuss the third Constitutional Amendment draft for introduction of GST. The new draft has tried to address the concern of the Empowered Committee to provide powers to Union Territories without legislatures to levy GST. It also proposed to create a GST Council through an Act of Parliament, instead of a presidential order, as proposed in the previous draft.
Of the 26 states present in today’s meeting, 16 supported the revised draft, while the remaining 10 opposed it. Some states felt the second draft was better than the third one because it clearly laid down the functioning and composition of the GST Council. The opposition to the Bill mainly came from BJP-ruled states.
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While Madhya Pradesh Finance Minister Raghavji said this would destroy the fiscal autonomy of the state, Gujarat Finance Minister Saurabh Patel said, “The new constitution amendment draft proposed by the government is retrograde in nature and completely against the fiscal federalism.”
Haryana Finance Minister Ajay Singh Yadav pointed out, “We had lots of deliberation on GST constitution amendment. Now, the Bill should be introduced in the Budget Session of Parliament.”
During the discussion with the committee, Mukherjee said concerns of the states could be heard by the Standing Committee, which comprises members from the ruling party as well as the Opposition. The finance minister said he would meet the states for a detailed discussion on their views on GST in the second leg of the Budget Session.
Meanwhile, the Centre has agreed to fully compensate states for the losses they suffered due to reduction in the central sales tax, estimated at Rs 14,000 crore in 2010-11.