The saga over the goods and service tax (GST) continues.
On Wednesday it received a new twist with a majority of
the states rejecting the 12 per cent GST rate
recommended by a committee of the 13th Finance
Commission.
Infact, states are now demanding that GST should
kick in only in 2011.
Except Kerala, most of the states have indicated GST
cannot be implemented before April 1, 2011 and none of
the states are ready to accept a revenue neutral rate
below 15 per cent.
Infact, most of the states are indicating a state
GST rate of a minimum 15 per cent.
This turns the key recommendations of the 13th Finance
Commission on its head, which has suggested 7 per cent
as state GST rate, 12 per cent as the revenue neutral
rate and implementation of GST by October 2010.
Interestingly, even senior members of NIPFP, the
other body which has given its recommendations on GST,
do not agree with what the 13th Finance Commission has
suggested.
Sushil Kumar Modi, deputy chief minister of Bihar, said,
“Anything below 15 per cent is unacceptable. This is the
majority view of the empowered committee. We will
communicate this to the 13th Finance Commission.''
Raghavji, finance minister of Madhya Pradesh, said, “GST
should not come before 2011. What is the rush? Wait for
one year.”
In the meanwhile, Asim Dasgupta, chairman of
empowered committee of state finance ministers, has
indicated they will meet Pranab Mukherjee in the first
week of January to flag off these issue, including the
draft constitutional amendments required for GST, which
now stand delayed.
It’s crystal clear that GST is not implementable by
April 1, 2010, which means the coming Budget will focus
on indirect tax rates, independent of the GST.
So, now it remains to be seen, what Mukherjee will
do about the stimulus measures, the fiscal sops given to
prop up the economy.
