Pranab will meet states on GST plan

He  is also likely to discuss the compensation package for states for any loss of revenue due to the implementation of this new indirect tax regime, slated for launch on April 1, 2011.

“On GST, we are having the meeting of empowered committee tomorrow,” Revenue Secretary Sunil Mitra told reporters. An official with the finance ministry said the finance minister will discuss compensation packages and constitutional amendments required to implement Goods and Services Tax (GST).

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