FinMin gives states too veto power in GST council

The Centre,in a redrafted constitutional amendments bill for the proposed Goods and Services Tax GST,has suggested that the states...

The Centre,in a redrafted constitutional amendments bill for the proposed Goods and Services Tax GST,has suggested that the states also be given a veto power along with the Centre in the proposed GST council so that every decision taken by the council is approved only when all the states and the Centre agree to it.

Sources told The Indian Express that the finance ministry has redrafted the contentious parts of the earlier proposals in the constitutional amendments bill but is yet to receive finance minister Pranab Mukherjees approval on the changes,which if agreed upon would be a significant policy shift from its earlier stance.

According to the earlier draft,any decision taken by the proposed GST council was to be approved by a two-third majority of the council and the Union finance minister.

The proposal was rejected by the states,which claimed that the proposal was meant to take away the fiscal autonomy presently enjoyed by them under the constitution. States like Madhya Pradesh had gone ahead to call it an anti-democratic and anti-poor move.

This had impelled the finance minister to say that he had no intention of becoming a super finance minister by usurping the states powers.

In the Rajya Sabha,the finance minister had said: I have no intention of becoming the super finance minister to interfere with the state GST8230; They the states will have their rights and I shall have my right .

The redrafted version says that all the decisions would be taken by the GST council with two-third majority and consensus of all the representatives of the states and the Centre.

Story continues below this ad

However,to the states demand of having the proposed GST Authority outside the constitution,the sources said the Centre is in favour of placing the authority in the constitution,but with some dilution.

The amendments are the first vital steps towards the implementation of the Goods and Services Tax in India. It would empower the states to levy tax on services while the Centre would be able to levy tax even after the production stage.

According to experts,if the draft constitutional amendment bill is not introduced in the ongoing monsoon session,it would be impossible to implement the new indirect tax regime from the rescheduled deadline of April 1,2011.