Arun Jaitley Meets State Ministers, Raises Hopes of Early Implementation of GST

 Displaying visible signs of urgency to build a rollout roadmap which can become part of the Narendra Modi government's first budget, Union Finance Minister Arun Jaitley today told the states that some of their concerns on the Goods and Services Tax, or the GST, would be addressed.

The government, which wants to implement the new tax regime on a priority basis, is grappling with demands from the states to institutionalize the process of compensating them for the revenue losses suffered by them because of the reduction in the rates of central sales tax, or the CST, from 4 per cent to 2 per cent.
 
The demand was articulated yet again in Mr Jaitley's meeting with a group of state finance ministers today to discuss the GST rollout roadmap. The states, sources told NDTV, stuck to their position that the Centre should first put in place an institutionalized mechanism to earmark funds for them. They wanted Mr Jaitley to incorporate this provision in the Constitution (115th Amendment) Bill, a legislation which was introduced in the Lok Sabha in 2011, but which has been lying with the standing committee on finance since then.
 
The Centre, these sources pointed out, is reluctant to commit itself to establishing such an institutional mechanism.
 
The GST, a major tax reform initiative that seeks to subsume levies such as excise and service tax, was initially scheduled to have come into force across the country from April 1, 2010, but has been hanging fire because of resistance from the states. Besides the issue of compensation, the states also want their concerns on fiscal autonomy to be factored in before rolling out such as major tax reform.
 
The states claim that they stand to loose Rs. 19,000 crore every year because of reduction in CST rate. 
 
In today's meeting, the state finance ministers also persisted with their demand for keeping the entry tax on petroleum and alcohol outside the GST ambit. Including them in the proposed tax regime, they argued, would hurt their revenue collection.   
 
Mr Jaitley, the sources said, told the state finance ministers that some of their concerns would be woven into the GST legislation.
 
Union Minister of State for Finance Nirmala Sitharaman, when asked whether Mr Jaitley's budget speech on July 10 would come out with a roadmap for GST rollout, said: "It's the prerogative of the Finance Minister. The effort is to sort out issues so that it can happen. The states have been proactive in helping a broader consensus to emerge.''

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