It is official. The much-anticipated Goods and Services Tax (GST), which will replace most of the indirect taxes levied by the Centre and states, will not be introduced from the targeted date of April 1.
The Bills pertaining to the introduction of a new law and amendment to the Constitution will not be tabled in the coming Budget session of Parliament. Finance Minister Pranab Mukherjee and state finance ministers will meet in April to decide a new date for the GST rollout.
For the first time, Asim Dasgupta, head of the empowered group of state finance ministers, clearly stated that the April 1 deadline would not be met as a range of issues were to be resolved first before introducing GST.
“Because of the difficulties connected with the passing of the required constitutional amendment Bill in the Budget session, it will not be practical to introduce GST from April 1. A date will be settled after meeting the finance minister in April,” Dasgupta, who is also the finance minister of West Bengal, told reporters after a meeting of the empowered committee with Mukherjee today.
While a GST rate and other issues in the proposed tax system would be discussed in April, preparations for rules and procedures for implementation of GST and information technology infrastructure “should be in full swing” now, Dasgupta said.
He added that a draft had already been prepared for amending the Constitution and it was being discussed with the law ministry for its comments.
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The introduction of GST has been deferred as the Centre and the states have not been able to sort out their differences with regard to various issues in the tax. While different states have been quoting different revenue neutral rates for GST, the Centre has also disagreed with the states on their suggestions like having a dual-rate structure for GST, keeping various taxes out of the GST ambit, and giving more exemptions.
Meanwhile, the Centre will compensate the states with two-thirds (about Rs 9,676 crore) of the revenue loss of Rs 14,181 crore on account of lowering the central sales tax (CST) in the current financial year. The remaining amount will be given in the next financial year.
Apart from this, arrears of Rs 1,000 crore will also be cleared by March. This would put further pressure on the government’s fiscal deficit, which is expected to widen to 6.8 per cent in 2009-10.
CST, a levy on inter-state transfer of goods, was reduced to 2 per cent from 4 per cent with the aim of removing it completely at the time of the introduction of GST.