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The Lion’s Share

GST stuck, ministers’ panel plans seventh study trip abroad

State finance ministers’ panel set to go to China, Russia next month.

The committee is planning the trip between August 19 and September 4 to “study the finer aspects of their indirect tax model”, sources told The Indian Express.  Illustration: C R Sasikumar The committee is planning the trip between August 19 and September 4 to “study the finer aspects of their indirect tax model”, sources told The Indian Express.
Illustration: C R Sasikumar

The states may disagree on the implementation roadmap for the ambitious goods and services tax (GST) but their finance ministers appear to agree on one thing — the need to make that extra foreign trip to understand the “nuances” of the GST better.

Next month, the empowered committee of state finance ministers, which is working with the Centre on thrashing out the road ahead for GST, will embark on a trip to China and Russia, its seventh such foreign trip since the idea of the new tax regime was first floated.

The committee is planning the trip between August 19 and September 4 to “study the finer aspects of their indirect tax model”, sources told The Indian Express.

After implementing value-added tax (VAT) across the country, the committee of state finance ministers was asked by the Centre to work with it on preparing a roadmap for introduction of GST, the next logical step to VAT, from April 1, 2010. An announcement to this effect was made by the then finance minister P Chidambaram in Budget 2008. However, the implementation of the new tax regime, which would cut down the cascading of tax, is yet to see the light of the day, having missed several deadlines now due to the flip-flop of states on important issues and an overall lack of consensus.

But the trips have been coming thick and fast. In 2006-07, the committee, headed by the then finance minister of West Bengal Asim Dasgupta visited Canada, London and Rome on a study tour. A year later, a delegation of state finance ministers along with state and central officials visited Australia and Singapore between May 12 and May 23 and later to Brazil and London between August 25 and September 5 “for studying the complexity of inter-state trade and how to track it without causing any distortion in pricing of commodities”.

After a three-year hiatus, the committee, along with central and state officials, embarked on a whirlwind tour, visiting seven countries. In 2011, a study tour was organised to Paris, Madrid, Brussels and Luxembourg from September 7-17, during which the delegation had discussions with OECD officials, EU officials and judges in European Court of Justice in Luxembourg. The visit was made under the chairmanship of Bihar’s former deputy chief minister Sushil Modi.

The year 2012 saw them visiting Toronto, Ottawa, Vancouver in Canada and Tokyo in Japan from September 12-26 to study the implementation of GST in both these countries. The committee said they had “useful discussion with the ministers and senior officials of Canada and Japan”. Last year, the committee organised a visit to South Africa.

The amount spent on these trips in 2012 and 2013 stood at Rs 56.13 lakh, according to the annual reports of the committee. As for the previous trips in 2007 and 2008, the committee made no mention of the expenditure in their annual reports.

An official, who did not want to be named, said that former Madhya Pradesh finance minister Raghavji, Modi and J&K finance minister Abdul Rahim Rather, who is currently heading the committee, participated in most of these visits. Along with that, Satish Chandra, member secretary of the committee, has been a part of all the foreign visits. Interestingly, Raghavji was a fierce opponent of GST.

However, despite the extensive travelling and studying, the state finance ministers are still far from reaching a common ground. Although Finance Minister Arun Jaitley has expressed confidence in getting the Constitution Amendment Bill for introducing GST passed by the end of financial year 2015, several states are still not comfortable with the GST design. Apart from demanding petroleum, alcohol, natural gas, purchase tax and entry tax be out of the ambit of GST, the states fear that the GST will take away the fiscal autonomy they enjoy. There is also the issue of compensation to states in lieu of the phase-out of the central sales tax.

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