Govt to cover states' loss

Stage set for introduction of GST regime from April 1, 2011

Govt to cover states' loss

This assurance was conveyed by top officials of the Finance Ministry at the meeting of the Empowered Committee of State Finance Ministers (ECSFM) held here.

“Senior officials of Finance Ministry conveyed to the Committee in unambiguous terms about the Centre’s preparedness to compensate states for fully switching over to the GST,” Chairman of ECSFM told reporters.

The GST, which seeks to replace the Excise Duty and Service Tax at the central level and Value Added Tax (VAT) and other local levies at the state level, was first proposed to be introduced with effect from April One this year.

But because of lack of consensus among states and Centre on wide range of critical issues relating to GST, the new tax regime, which is being termed as the most radical reform in the Indirect Tax front, is now proposed to be introduced from April 1 next year.
“With the Centre agreeing to fully compensate states for adopting the GST the major hurdle on the path of switching over to the new tax regime will be a smooth affair,” Dasgupta.

Basic infrastructure
The 13th Finance Commission has already recommended allocation of Rs 50,000 crore for evolving compensation package for states, which are likely to incur revenue loss for shifting to GST.

“The Committee was told clearly that the Centre is willing to fully implement the Finance Commission’s recommendation on compensation packages”, Dasgupta said. As part of exercise to prepare the basic infrastructure for facilitating the implementation of the GST the ECSFM decided to constitute a high-powered committee to evolve the module for Information Technology infrastructure for the new tax regime. The committee, which will be headed by Unique Identification Authority of India (UIDAI) Chairman Nandan Nilekani, is expected to submit its report within 3 months, Dasgupta said.

“For successful implementation of the GST across the country one needs an efficient IT network to provide the back up to the new tax regime. Once the committee submits the report the final blueprint for the proposed IT infrastructure will be decided in consultation with the Center,” he said.

At the meeting the ECSFM took stock of the progress made on the front of preparing the draft for legislation for Constitutional amendments for empowering both Centreand States to levy GST.

Joint working group
Last year a Joint Working Group (JWG) was set up to prepare drafts for these proposed Constitutional amendments. “The draft is more or less ready. It has to be vetted by the Law Ministry . We have asked the JWG to come out with drafts in 15 days time,” Dasgupta said. He indicated that the ECSFM would meet the Finance Minister Pranab Mukherjee next month to apprise him of the progress made on preparation of ground work for introduction of the GST.
DH News Service

Striking a consensus
* 13th Finance Commission recommends Rs 50,000 cr as compensation package for states
* Panel set up for IT infrastructure
* Draft document for constitutional amendment to be ready in 15 days
n Meeting with Pranab Mukherjee next month

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