Mussoorie, a popular hill station about 280 km away from Delhi, may witness a major tax reform next month, if the finance ministers of 29 states seal a deal with officials of Centre on the Goods & Services Tax (GST) at a two-day meet there.
On the agenda for the meeting on May 10 and 11 are the unresolved issues related to GST legislation, Central Sales Tax (CST) compensation and progress on IT implementation for GST.
The Empowered Committee of State Finance Ministers will ponder over the progress made by three committees constituted during the Bhubaneswar meet in January on the issues of ‘revenue neutral rate for GST’, ‘tax on inter-state movement of goods’, and ‘problem of dual control’.
The committee of Centre-state officials, set up for suggesting the possible rates for goods and services in the new tax regime, is considering a floor rate of nine to ten per cent for standard goods with a band of two percentage points, a lower merit rate of four to five per cent, and a rate of one per cent for precious metals. A service tax rate of eight per cent is likely to be suggested without a band.
“While the GST Council, comprising state finance ministers and the Union finance minister, will take decisions on the rates, the committee of officers will lay down a broad framework,” said a government official, who did not wish to be identified.
Whenever the states met outside New Delhi, some sort of breakthrough in GST negotiations was achieved. While the Bhopal meet, last year, paved the way pave for introduction of Negative List for services in Budget 2012-13, the Bhubaneswar meet helped break the logjam between the Centre and the states on some of the contentious areas of GST.
However, it needs to be seen if the idyllic setting of this hill station in Congress-ruled Uttarakhand will help cool down the tempers of BJP-ruled states such as Madhya Pradesh and Gujarat, which have been opposing GST.
The Empowered Committee would like to get a clarity from the Centre on when would their dues would be cleared for making losses on account of reduction in CST rate in anticipation of GST. The Centre had agreed to give compensation of Rs 34,000 crore, but the Budget provided for only Rs 9,000 crore.
Officials said there is a difference of opinion among the states themselves on issues such as multiple rates for GST, its phased roll-out and powers of the GST Council (which will be an executive body) to decide the tax rates and bands for all the states. All these issues are likely to be discussed in Mussoorie.