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FM: Need consensus on GST soon to help push growth

States unanimous in compensation demand for likely revenue loss

Finance Minister Arun Jaitley with Rajasthan Chief Minister Vasundhara Raje Scindia during a pre-Budget meeting with finance ministers of states and Union territories in New Delhi on Monday. Amit Mehra Finance Minister Arun Jaitley with Rajasthan Chief Minister Vasundhara Raje Scindia during a pre-Budget meeting with finance ministers of states and Union territories in New Delhi on Monday. Amit Mehra

States on Monday demanded compensation for phasing out Central Sales Tax (CST) and loss of revenue due to introduction of GST even as finance minister Arun Jaitley urged them to act like a “team” and resolve contentious issues for its implementation at an “early date”.

Emphasising the need for “rounding off corners”, Jaitley, in a pre-Budget meeting with finance ministers of states, said, “As part of the economic integration, GST is one pending issue, on which now consensus needs to be built and implementation done at an early date. Implementation of GST has the potential to significantly improve the growth story….”

While almost all the states acknowledged the importance of the proposed Goods and Services Tax (GST), they were unanimous in their demands for compensation for the likely revenue loss in the event of introduction of the new regime. Alongside, they also demanded pending compensation for phasing out CST to 2 per cent from the earlier 4 per cent. States like Haryana claim that loss to the tune of Rs 2,100 crore in FY13 and FY14 on account of phasing out of CST.

A state official said that the CST compensation is “the most important” confidence building step the Centre has to take to push for an early implementation of the new indirect tax regime.

Suarabh Patel, finance minister, Gujarat, which has consistently opposed the GST on the grounds of loss of fiscal autonomy, said, “Most of the states have agreed to GST, we have discussed the CST compensation issue, GST implementation and protection of revenue on account of GST”.

Similarly, West Bengal finance minister Amit Mitra also said that while the state supports the roll out of the new tax regime, “it has to be done with consensus of all states. It also has to pay compensation to the state governments. Such confidence building measures from the Centre are missing.” The Centre has to pay dues worth Rs 3,600 crore to the state, Mitra added.

The UPA-II could not implement GST, which was scheduled for roll out in April 1, 2010, due to stiff opposition from BJP-ruled states like Gujarat and Madhya Pradesh along with contentious issues like inclusion of petroleum and alcohol in GST. Further, states also raised the issue of high inflation and lack of infrastructure and asked for budgetary allocation for infrastructure projects. “Inflation and infrastructure were the common issues raised by the states. Almost every state spoke about infrastructure creation, highway and airport development. Their main concern was allocation for the infrastructure sector in the Budget. States also spoke about river linking and waterways and better targeting of Centrally-sponsored schemes,” the state official said.

On the challenge posed by inflation, Jaitley said that the government will put in effort to break the “vicious cycle of high inflation and high interest rates while addressing the challenge of slowdown in economic growth, which has crawled at sub 5 per cent in the recent years. He sought support of states for tackling fluctuation in prices.

Budget likely in second week of July
Finance minister Arun Jaitley may present the Budget 2014-15 in the second week of July. The session is likely to be convened on July 4. However, the Centre is yet to decide on whether to hold a separate monsoon session or the Budget session would continue after a recess, according to sources.     (ENS)

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