Keen to meet the April 1, 2011, deadline for the rollout of goods and services tax, the finance ministry has made significant concessions to the states that have opposed the Constitutional Amendment Bill for the fear of losing their fiscal autonomy. Sources said finance minister Pranab Mukherjee has agreed to make GST council a recommendatory body, which means that its decisions won?t be binding on the states.
In the revised draft of the Constitutional Amendment Bill given by the finance minister Pranab Mukherjee to empowered committee chairman Asim Dasgupta on Wednesday, the Centre has agreed to drop the words ?binding on states? for any decision by the GST council, a proposal in the earlier draft that had faced stiff opposition by the states.
However, another point of contention between the Centre and states ? the GST tribunal ? would still be the part of the Constitutional Amendment Bill and not brought through a separate legislation as demanded by the states. The GST tribunal has been proposed to resolve disputes between states or states and the Centre in the GST regime.
?To ensure autonomy the ministry has decided to drop the binding on states to follow GST council?s decisions. However, we cannot do much about the GST tribunal. As a matter of fact this is the correct method to resolve GST disputes,? an informed source told FE.
Finance ministry officials also said that Dasgupta responded positively to the proposals and would get back on the revised draft very soon. Dasgupta may discuss the proposals with the states now. The next meeting of the empowered committee of state finance ministers has been scheduled on August 18 and it is expected that states will take a decision on the revised draft on that day. The decision may also be in favour of the draft as the revised draft is a mellowed down version of the previous one.
The goods and services tax, aimed at bringing in a common indirect tax regime in the country, will subsume most of the indirect taxes levied by the Centre like service tax and excise and those levied by states like VAT and octroi. GST has to be introduced by April 1, 2011, as per the target set by the finance ministry but for that the bill for introducing it has to tabled at least in this session of Parliament. Parliament session ends on August 27.