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“He (Mr Mukherjee)
communicated to us that he is prepared to go beyond it (the 13th Finance
Commission recommendation of Rs 50,000 crore compensation over next five
years),” said Asim Dasgupta, West Bengal FM and chairman of the empowered
committee of state finance ministers.
“A finance ministry representative communicated that the union finance minister
has sent a message... he will stand by states during implementation of GST to
protect any revenue loss,” he said.However, a central government official said
the offer for compensation was contingent to states accepting the Centre’s
suggestion of common threshold, common exemption list and uniform goods and
service tax rate.
The official, however, did not elaborate on what could be the likely
compensation, saying it would depend on the agreed GST rate.
The draft of the proposed constitutional amendments required for the
implementation of GST will be sent to state finance ministers over the fortnight
by the law ministry, he added. Constitutional provisions will have to be amended
to empower the Centre to tax goods at the trade level instead of factory gate
and states to tax services.
States have to be compensated for any revenue loss on account of implementation
of the proposed goods and services tax, which will replace most indirect taxes
in the country, both at central and state levels. The Centre has also assured
states compensation on account of central sales tax loss for current financial
year going beyond the agreed deal. This clearly indicates the Centre’s
willingness to go the extra mile to take states on board to roll out GST on the
scheduled date of April 1, 2011.
“The Centre has an open mind on this. They have asked us to suggest a scheme of
compensation which can be deliberated upon for final view,” Mr Dasgupta said.
The CST, imposed on inter-state movement of goods, was cut from 4% to 3% in
2007-08 and then to 2% in 2008-09. States expressed mixed feelings on the fresh
offer from Mr Mukherjee. Bihar deputy CM Shishil Modi said assurance on
compensation is a positive movement.
But some non-congress ruled states remained sceptical. MP FM Raghavji expressed
concerns on constitutional amendment leading to the creation of FMs council with
Union finance minister as chairman and state FMs as members.
, to decide on changing GST rate.
Madhya Pradesh joined Punjab and Haryana to seek purchase tax on wheat outside
GST. Similar views were also expressed by Chhatisgarh, which has imposed a
purchase tax on rice.
Source: Times of India, India, dated
22/05/2010
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