Centre,states face-off to delay GST

The face-off between the Centre and states over the Constitutional amendment for introducing the Goods and Services Tax...

The face-off between the Centre and states over the Constitutional amendment for introducing the Goods and Services Ttax GST is set to delay and derail the schedule for implementation of the new indirect tax regime from April 1,2010.

The draft for the amendment has still not been agreed upon by the two as there is still no consensus on contentious issues like placing the GST under the concurrent list or in a combined list of the centre and state. Finance minister Pranab Mukherjee will meet law minister Veerappa Moily tomorrow along with the solicitor general,law secretary,legislative secretary,revenue secretary and other department officials to find a way out of the stand-off. We are stuck with the situation. There are two options for introduction of the GST in the Constitution. One is to put it both under the state and centre,where the central law prevails over the state. The other is to put it under the concurrent list. There has been no agreement on the issue so far in both the options, official sources told The Indian Express.

The other hurdle plaguing the discussions is the creation of a body that will harmonise between the centre and states on various issues which may arise in the future. The contentions eclipsing the process of finalising the draft amendment are issues such as how to create the body,who will head it,what would be the mandate of the body,etc.

The body will have representation from both the state and centre and it will coordinate in the GST implementation.

States have been crying foul over the fact that their fiscal autonomy would be impacted by the move. They have not been able to reach a consensus over which list the GST should be put in. Also,they have not been able to decide on issues like who will head the body. In fact,it has still not been decided that whether the body would be empowered to penalize in case of breach of the legislation. These works have not been done. We will take up the issue in the meeting. The very purpose of this meeting is to find a solution and bring about a consensus, the sources said.

The Constitutional amendment is the first step towards the introduction of the new indirect tax regime which will subsume all central and tax levies and reduce the cascading effects of taxes.

Constitutional amendment will empower the centre to levy tax on sale of goods and states would be able to tax services. Presently,the centre can tax only manufacturing of goods and services,while states can tax only sale of goods. The proposed amendment is likely to be done in Schedule VII of the Constitution.