State FMs' panel agree on GST law: Odisha minister

The empowered committee of state finance ministers has reached a broad consensus on preparing a model law for implementation of the proposed Goods & Services Tax (GST), Odisha Finance Minister Prasanna Acharya informed the legislative assembly here today.

The panel has agreed that such a law should be left to be adopted by the states and the Centre voluntarily, as this arrangement will ensure fiscal autonomy of the states, he said. The committee has also decided, said Acharya, that the Constitution be modified to provide for floor rates with a band, so that states have the flexibility to raise tax.

In the proposed Article 279-A of the Constitution (115th Amendment) Bill introduced in Parliament by the Centre, a GST council has been envisaged to make recommendations with references to taxes and tax rates. The Bill also provides for an Article 279-B, on a GST Dispute Settlement Authority to adjudicate between states or a state and the Union. Acharya says the empowered committee has decided there should not be any GST Dispute Settlement Authority.

"The empowered committee has reached a broad consensus that formulation of Entry 52 in the Constitution amendment Bill should be modified, as the present formulation is a retrograde step and shall take it back to collection of octroi by the local bodies," the minister said. The consensus was reached by the empowered panel in its previous meeting here on January 28-29.

The Constitution amendment Bill, Entry-52, of the State List is worded in the Bill as "taxes on the entity of goods into a local area for consumption, use or sale therein to the extent levied and collected by a panchayat or municipality".

On the issue of central sales tax compensation, he said, "Due to slashing of the CST rate (from four per cent to two per cent), Odisha has suffered a revenue loss of Rs 1,533.97 crore. The central government has provided (only) Rs 256.17 crore in 2011-12 by way of compensation." Odisha, he said, expected compensation of Rs 1,235 crore.

The Centre has agreed that states will be given compensation of 100 per cent, 75 per cent and 50 per cent for 2010-11, 2011-12 and 2012-13, respectively.

This is estimated to cost the central exchequer around Rs 34,000 crore. States had demanded Rs 19,000 crore for 2010-11, of which only around Rs 6,000 crore has been paid by the Centre.