Finance Minister P Chidambaram seems to have taken it upon himself to ensure that the Constitutional Amendment Bill on the Goods and Service Tax (GST) is passed at the earliest.
In an effort to build greater consensus with states opposing GST, Chidambaram recently met Bihar Finance Minister Sushil Modi, who is also the chairman of the empowered committee of state finance ministers on GST. The union finance minister tried to understand the issues that had been raised by state governments. In the course of the hour-long discussion between the two leaders, Chidambaram assured Modi that he was aware of the doubts and concerns that are being raised by the state governments and he would take a personal initiative to end the grievances at the earliest.
The government has been under attack from Opposition parties, especially the Bharatiya Janata Party (BJP), and industry experts for not carrying out financial reforms, which is hurting the economy. Interestingly, while Chidambaram is hopeful that the GST Bill would be cleared this financial year, former finance minister Pranab Mukherjee had told senior leaders of the BJP that implementation of GST was not a possibility in the second term of the United Progressive Alliance (UPA). Mukherjee’s view was that there isn’t enough time for the general elections and no government will initiate big-ticket reforms just before the Lok Sabha elections. Parliament’s standing committee on finance, headed by former finance minister Yashwant Sinha, is also working hard to complete the report on the Constitution Amendment Bill. Though Sinha wanted to submit the report on GST in this session of Parliament, the work was delayed because the finance ministry has not replied to some of the queries raised by parliamentarians in the committee.
Meanwhile, during a recent meeting of the consultative committee of the finance ministry, Chidambaram said he hoped that the Bill on GST would be cleared before the end of the financial year.
The finance minister is of the view that GST would help build an effective and efficient tax system that would be fair to taxpayers. Chidambaram told the gathering that there were several issues related to GST, but they were not insurmountable.
However, states are demanding that the Centre first resolve the issue of compensation to states for revenue loss due to cut in Central Sales Tax before moving ahead with GST. This demand was raised by some members of Parliament at the consultative committee meeting, too. Earlier, the Centre had committed itself to paying compensation till 2009-10. However, since GST was not implemented, states are demanding compensation for 2010-11 as well.
Mukherjee had cleared compensation of Rs 20,000 crore for states before leaving the North Block to take over as President. However, no decision has been taken so far.
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GST roll-out has already missed three deadlines from April 1, 2010. The Constitution Amendment Bill, being vetted by Parliament’s standing committee, is just an enabling provision for the Bill to come out. In the current scheme of things, the Centre cannot impose tax beyond manufacturing and states cannot impose service tax.
After the passage of the Constitution Amendment Bill, GST Bills have to be passed by the Centre and state legislatures.