GST rollout hits new roadblock

Govt rejects states plea on service tax

Center’s disapproval of alternate model of GST mooted by some states was indicated by the Revenue Secretary Sunil Mitra here.

“We have expressed our inability to accept the suggestions of some states that will dilute the essential features of the GST,” he told reporters.

The alternate model of GST is understood to have proposed allowing states to impose Service Tax without constitutional amendment.

This alternate model of GST is understood to be mooted by some states including the BJP-ruled states as well as non-BJP ruled states like Tamil Nadu and Uttar Pradesh.

The alternate model of GST is also understood to be supported by Empowered Committee of State Finance Ministers on GST Chairman Ashim Dasgupta.    “We are of the view that it will not be possible to take GST forward without necessary constitution amendment,” Mitra said. 

For the GST to be operational the CAB will seek to amend Constitution to empower states to impose Service Tax. The CAB is needed to be approved by two third majority in both houses of Parliament followed by ratification by two thirds of state assemblies. The states themselves are yet to arrive at a consensus over the features of the proposed CAB.

Few months back the Center had floated the first draft of the CAB for rolling out the GST.  The first draft had proposed setting up of a GST Council to take decisions on GST with the consent of the Union Finance Minister and a two-third majority of states.

The draft was understood to have proposed vesting veto power with the Union Finance Minister on state taxation issues. Many states objected the first draft on the ground that such a provision would affect the fiscal autonomy of states to levy taxes. The GST was earlier proposed to be implemented from April One this year. But it missed the deadline as both centre and states failed to evolve consensus of the GST.

Though it is now proposed to implement the GST from April 1, 2011, it is likely to miss this deadline too in the face of ongoing lack of consensus among states and Center on the final shape of the proposed CAB.