The government is awaiting the result of the Chief Ministers’ conclave in Bhubaneswar later this month to finalise its plans on rollout of the crucial goods and services tax (GST), which has missed several deadlines in the past.
Chief ministers of various states will meet in Bhubaneswar on January 28-29 to discuss contentious issues about GST and the compensation in case of revenue loss.
“The Bhubaneswar meet is crucial as the stand of chief ministers will firm up government’s thinking,” a senior finance ministry official told Deccan Herald.
The major indirect tax reforms measure has faced opposition from Bharatiya Janata Party-ruled states, mainly Gujarat and Madhya Pradesh.
“We hope all issues are resolved at the Bhubaneswar meeting,” the official added.
Finance Minister P Chidambaram has given enough hints to state finance ministers to tie-up loose ends on GST, India’s most ambitious indirect tax reform initiative.
In his pre-budget meeting with chief ministers, Chidambaram was understood to have said that he would make GST a part of his Budget speech, even if they reached consensus just days ahead of the Union Budget to be presented in February-end.
GST has been identified as one of the key reform measures that will help boost reforms and drive up revenues and growth.
The states are demanding higher compensation on account of reduction in the Central Sales Tax (CST) from four to two per cent. Although the government is open to the idea of giving them more compensation, it has said that it would all depend on the fiscal situation.
The centre, which is committed to stick to the fiscal consolidation roadmap and intends to restrict the fiscal deficit to 3 per cent of GDP by 2016-17, is finding it difficult to hand out higher compensation. The finance minister had also set up two committees — one on the CST compensation issue and the other on the design of the GST. These committees are expected to submit reports on January 21.
The Bhubaneswar meeting of chief ministers is also expected to discuss the recommendation of the two committees.
The GST Constitution Amendment Bill, introduced in Parliament in 2011, is currently being vetted by the standing committee on finance. The draft bill needs to be passed by a two-third majority in Parliament and needs the vote of at least half of India’s 28 state governments. With BJP rule in one-fourth of these states, its support for the bill at the state and central levels will be necessary.