A consensus on new indirect tax system GST has eluded delaying its rollout further, as some states in contrast to the Centre's proposal today suggested a new model for the council which will be empowered to make changes in the fresh regime.
At a meeting of the Empowered Committee of State Finance Ministers here, panel chairman Asim Dasgupta floated a proposal that the current committee be enlarged with Union finance minister as its chairman and one of the state finance ministers as vice-chairman for making changes in the indirect tax system.
This is in contrast to the Centre's proposal earlier that a council chaired by the Union finance minister state finance ministers as members be set up and any change in GST be effected if there is a complete consensus.
This was suggested by the Centre after its earlier proposal that the council be empowered to make changes in GST with the approval of Union finance minister and two-third of the council members was rejected by states. They feared a veto power to the Centre over their fiscal autonomy.
"In one approach, states are saying that with a little bit of further revision, we can go ahead... Let us form GST council with union finance minister as chairman and one of the state finance ministers as vice-chairman," Dasgupta told reporters after the meeting.
For establishing this larger committee, only basic amendment to the Constitution would do, some states suggested.
However, sources said the union finance ministry officials were of the view that whatever Constitutional amendment is required should be made fully as there is no point in going for half-baked reforms.
Madhya Pradesh Finance Minister Raghavji, a bitter critic of the Centre's proposal, said, "There is nothing new in today's meeting. First, there has to be a structure of GST. There is no consensus on many things like threshold, purchase tax, rates etc."
Gujarat Finance Minister Saurabh Patel said it is not useful to discuss at this stage constitution amendment unless the issue of autonomy and fiscal flexibility of states are fully addressed.
Many states categorically said that GST has now become a political issue, with Congress-ruled states agreeing with the Centre's proposal and BJP-ruled and other states like Uttar Pradesh differing with it.
"Now, it is more of a political issue. It has to be resolved by senior leaders of all the parties. They (few BJP-ruled states and Uttar Pradesh) are opposing for the sake of opposing. Union Finance Minister should have a dialogue with senior leaders of the Opposition parties," Haryana Finance Minister Ajay Singh Yadav said.
The rollout of GST, which will subsume excise duty and service tax at the Centre's level and VAT on the states front, besides local levies, has already missed a deadline of April 1, 2010. The new deadline of April 1, 2011 is also likely to be missed and the Centre has now said that it may be rolled out sometime in the next financial year.
The Centre had also suggested a dispute settlement body which some states opposed.
Responding to the development, tax consultant Deloitte's indirect expert Prashant Deshpande said dropping of GST council and the common dispute resolution settlement body would mean eliminating two important pillars of unified and harmonious GST system.
"Mostly BJP-ruled states are opposing GST structure," Delhi Finance Minister A K Walia said.
Earlier in the day, Union Revenue Secretary Sunil Mitra said, "The empowered State Finance Ministers are meeting today. I am hopeful there will be a consensus which we can accept and bring in the GST some time in the next financial year."
Despite differences, Dasgupta put up a brave front,saying there has been a positive attitude on the part of states towards a consensus on further revision on GST-related constitution amendment.
However, he also added some states are for whatever amendment is required for the rollout of GST while others want basic amendment.
Constitution amendment is required because in the current scheme of things the Centre cannot impose tax beyond manufacturing and states cannot levy service tax.
State finance ministers will also meet tomorrow here.
