Seeking the support of states for implementation of Goods and Services Tax (GST) from April 1, 2011, Finance Minister Pranab Mukherjee today said the proposed GST Council will only be a recommendatory body and all decisions will be taken by consensus.
"The decisions of the GST Council would be 'recommendations' to the Union and the states," he told a meeting of the Empowered Committee of State Finance Ministers.
The states had expressed concern over the loss of fiscal autonomy on account of the grant of veto power to the Union Finance Minister as chairman of the GST Council, as proposed in the draft Constitution Amendment Bill prepared by a working group for implementation of the new tax regime. These issues, however, were addressed in the revised draft.
The collective wisdom of the council would be a valuable recourse in benchmarking rates, exemptions, thresholds and other key parameters, Mukherjee said, adding, "Even if its decisions are not binding, they would be useful as guiding principles which we would choose to ignore or violate only in very grave or exceptional circumstances."
Making a strong case for introduction of the GST from April 1, 2011, Mukherjee assured the states that their concerns will be addressed by the joint working group in the third draft of the Constitution Amendment Bill.
Earlier in the day, the Empowered Committee met under the chairmanship of West Bengal Finance Minister Asim Dasgupta, where BJP-ruled states sought one months' time to respond to the revised draft.
"The states have got hardly two working days to examine the revised draft and take a decision thereon...," Madhya Pradesh Finance Minister Raghawji said.
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"I have been wondering the reason for the rush to implement the GST as if the country is passing through a severe financial crisis and GST is the panacea for all the ills," Raghawji added.
The government plans to introduce the Bill in the current Monsoon Session of Parliament to pave the way for rolling out the GST from April 1, 2011.
Under the proposed plan, all central and state taxes like excise, VAT and service tax will be subsumed into GST once the new indirect tax regime comes into effect. The revenue from GST will be shared equally between the Centre and states.