Pranab to meet state FMs on July 21 on GST

Likely to discuss compensation package for any loss of revenue due to new regime

Besides, he is likely to discuss compensation package for states for any loss of revenue due to the implementation of this new indirect tax regime.

“The Finance Minister will meet state finance ministers on July 21 to discuss compensation packages and constitutional amendment required to implement the Goods and Services Tax (GST),” a finance ministry official told PTI.

Before meeting Mukherjee, state finance ministers will meet among themselves on the same day to discuss the constitutional amendment draft prepared by the Union Law Ministry to implement GST, besides the compensation package.

State finance ministers will meet under the umbrella of the Empowered Group, headed by West Bengal Finance Minister Asim Dasgupta. The finance ministry had explored the feasibility of introducing a Fourth List (Union List, State List and Concurrent List being the other three) in the Constitution that gives both the Centre and the states equal taxation powers, as currently the Centre cannot impose indirect taxes beyond manufacturing, while the states cannot levy service tax. However, the Fourth List idea was dropped later on. The other option is to allow the Centre and the states to levy GST by amending the Union and State Lists. The discussions between the Centre and states over these issues assume importance since implementation of GST has already been delayed by a year. Now it is slated to be implemented from April 1, 2011. But for that, consensus between the Centre and the states is essential.

The states have already floated a discussion paper on GST, which will replace the excise duty and service tax at the central level and value-added tax at the state level, besides the cess, surcharges and local taxes.

States may ask for fiscal autonomy
Fearing that their fiscal autonomy will be impacted by the uniform tax structure, state finance ministers are likely to bargain for some flexibility on proposed GST when they meet Finance Minister Pranab Mukherjee, reports PTI from New Delhi.

The states would not be able to independently take any decision to mobilise additional financial resources by taking recourse to increase in the rates of taxes, he had said.
State governments are likely to bargain for retaining some degree of control over tax matters.