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PM Modi govt to sort out compensation issues for early GST roll-out: FM Arun Jaitley

The long pending tax reform, GST has been highlighted as an important agenda of Modi govt.

Finance ministry officials are trying to convince new FM Arun Jaitley to stick closer to the fiscal deficit projections made in the Interim Budget. (PTI) Arun Jaitley has met state finance ministers twice within a month and that too before Budget

Finance Minister Arun Jaitley today said the Centre would sort out compensation issues with states to ensure early roll-out of Goods and Service Tax (GST), a new indirect tax regime that will subsume various levies.

After meeting state finance ministers, he said there is a broad consensus on implementing the GST regime and efforts will be made to sort out the pending issues, especially with regard to compensation for loss of revenue.

“Fixing compensation issue is critical to roll-out of GST,” Jaitley said.

Briefing the media about the meeting, Minister of State for Finance Nirmala Sitharaman said it was difficult to give a timeframe for introduction of the new tax regime, but “it (the constitutional amendments) will happen soon”.

“Discussions are intensive and in friendly atmosphere. We are definitely progressing on the issue of GST. We are moving towards greater consensus. That gives me a hope that GST would be sorted out sooner. Of course, we are in better position from where we have started,” she said.

The government is looking at the compensation part which has been an issue of concern for all the states, she added.

“(This) is an issue, with due respect, we have inherited and we would like to work on, we are sorting out,” she said.

When asked if Centre gave any assurance to states on compensation, she said: “We are talking with a completely open mind and we have not given any commitment either way for anything.”

Earlier in the day, Empowered Committee of State Finance Ministers and senior officials of the central government had met separately to brainstorm on different aspects of the GST, including compensation to state governments for their revenue loss due to halving of Central Sales Tax (CST) to 2 per cent.

The long pending tax reform, GST would subsume indirect levies such as excise, service and local taxes, has been highlighted as important agenda of Modi government.

Sitharaman said some of the states demanded inclusion of GST compensation in the Constitution Amendment Bill for introduction of the new indirect tax regime.

“Few states have also asked about keeping petrol and entry tax out of GST but large issue is how are they going to get compensation…,” she added.

Stressing that the central government is keen to introduce the GST, she said Jaitley has met state finance ministers twice within a month and that too before Budget.

When asked if the Budget speech will give roadmap on GST, Sitharaman said: “We are spending time to get something in Budget but is a prerogative of the Finance Minister (Jaitley) that what and how he is going to say.”

After the morning meeting, Chairman of Empowered Committee and Finance Minister of Jammu and Kashmir Abdul Rahim Rather said that all states are on board and only some concerns need to be addressed by the Centre.

“Every state wants GST to be implemented. Only they want their concerns are addressed. That will be done I think,” he said.

Referring to concerns being flagged by various states, he said that “there are certain areas of disagreement between the state and the centre. Like petroleum products, in the Shillong meeting we had made a consensus that petroleum products should be kept outside GST, it needs to be subsume”.

Besides, he said, GST compensation is another issues. The revenue loss to states due to implementation of GST should be compensated by the centre.

Rather said: “Government of India has said it will give compensation for three years, but it has not agreed to make compensation to make it a part of the constitution through amendment. But states are insisting that compensation should be a part of the constitution amendment so that states get their compensation.”

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