GST will not be introduced from April 1, 2010     

After many doubts and much speculation, it’s now official. The proposed Goods and Services Tax (GST) which is to replace most of the indirect taxes levied by the Centre and the States will not be introduced from April 1, 2010. A fresh date for its implementation will be announced in April after a meeting between the States and the Union Government.

Speaking to the media after a meeting with Union Finance Minister Pranab Mukherjee here on Thursday, Empowered Committee of State Finance Ministers chairman Asim Dasgupta said: “Because of the difficulties connected with the passing of the required constitutional amendment Bill in the Budget session, it will not be practical to introduce GST on April 1, 2010…The new date for [its] introduction, the Union Finance Minister suggested, would be settled in April.”

As per the original schedule of implementation, the GST was to be launched from April 1 this year to bring about uniformity in the indirect taxation structure throughout the country by doing away with Central levies such as excise duty and excise tax along with the value added tax (VAT) and octroi at the State level.

However, indications that the introduction of GST would be delayed were clear from the fact that the States failed to arrive at a consensus with regard to the structure of the new levy as well as the tax rates for the various commodities.

Besides, there was no convergence of views on the CST (Central Sales Tax) compensation to the States. It may be recalled that while introducing the VAT in the States the CST was reduced from four per cent to two per cent for inter-State transfer of goods with the objective of scrapping it completely upon the introduction of the GST. However, there was a divergence of views between the Centre and the States on the amount of compensation for the consequent revenue losses.

Dr. Dasgupta indicated that during Thursday’s meeting Mr. Mukherjee agreed to compensate States to the extent of Rs. 9,676 crore, which works out to about 68 per cent of the total revenue loss on this account.

Source: The Hindu, India, dated 29/01/2010