The roll out of Goods and Services Tax from the scheduled date of April 1, 2011 has hit a political roadblock, as BJP-ruled states along with some others continue to oppose the draft of constitutional amendment bill.
The Empowered Committee of State Finance Ministers met today to discuss the revised draft bill but a consensus could not be reached with the BJP-ruled states resisting the draft on fears that it would encroach states' fiscal autonomy.
DMK-ruled Tamil Nadu and BSP- administered Uttar Pradesh also opposed the draft.
"Mostly the BJP-ruled states are opposing. UP is also not agreeing and Tamil Nadu wants that their autonomy should not be affected. I think there is some political agenda, which has to be dealt with by the BJP high command," Haryana Finance Minister Ajay Singh Yadav told reporters after attending the meeting.
When asked whether there was a political agenda in opposing the draft, Punjab Finance Minister Manpreet Singh Badal said, "I think so."
In fact, Madhya Pradesh and Gujarat suggested alternative GST model, with many states questioning the need for this when only six months were left for its scheduled roll out.
Madhya Pradesh Finance Minister Raghavji said, "States autonomy would be affected by constitutional amendment. We have opposed it. We have suggested alternative model by which amendment to constitution is not required."
"The proposed amendment to the constitution is not acceptable to us," Gujarat Finance Minister Saurabh Patel said in a speech circulated to the mediapersons, since he did not attend the meeting.
Yadav said it was difficult for the states to introduce GST from April one, 2011, even as the original schedule of launching it by April one this year was missed.
Replying to the query whether the new deadline would be met this time, Empowered Committee chairman Asim Dasgupta said, "This I will tell you after meeting the Union Finance Minister."
The Empowered Committee representatives will now meet Finance Minister Pranab Mukherjee to inform him about deliberations today. They will again meet with representatives of the Union Finance Ministry in a month's time, Dasgupta said.
Officially, however, Dasgupta tried to put up a united face, saying there was greater convergence on the issue of the revised draft.
"I find convergence on GST has improved significantly," he said.
However, Dasgupta admitted there were some states who would agree to the draft with some amendments, and a "few others" who would reject the draft in entirety.
Officials said BJP-ruled states, basically, did not agree to the GST Dispute Settlement Authority, proposed in the draft, saying it would infringe on their fiscal autonomy.
The authority is proposed to settle the dispute between states, or between states and the Centre.
Dasgupta, however, refused to give a political colour to the division in the committee.
When asked whether BJP-ruled states were opposing the draft, he asked the reporters," can you (not) categorise the states in terms of political affiliations? I have to take everybody with me. I cannot distinguish between states on any issue, other than economic."
"States' concerns are basically for retaining and upholding fiscal autonomy and also retaining some flexibility in the system so that if there is any natural calamity, states will have to take recourse to additional tax measures. States want that legislature of states to be given primacy, which is there currently," Dasgupta said.
The Empowered Committee discussed the revised draft of the Centre, after the first one was rejected by states alleging it proposed giving veto power to the Union Finance Minister on states' taxation issues.
The revised draft suggested that any decision relating to GST could be taken by complete consensus in the proposed GST council, comprising both Union Finance Minister and states representatives.
GST roll out has already missed a deadline this fiscal due to differences between the Centre and states over its' structure.
Now even the possibility of meeting the new deadline by April next year seems remote, considering the constitutional amendment bill could not be tabled in the monsoon session due to differences among states on the draft proposed by the Centre.
Finance Ministers of only ten states attended the meeting today, while others sent their officials. While MP Finance Minister Raghavji suggested the states be allowed to impose service tax without constitution amendment, Gujarat Finance Minister Saurabh Patel suggested upfront compensation model for loss in GST revenue.
Haryana Finance Minister suggested that states be allowed to impose service tax from the next fiscal, even if GST was not implemented by then.
At present, states cannot impose service tax, which is why the constitution amendment bill is required. The bill is also needed to allow the Centre impose a tax beyond manufacturing.
