The rollout of the proposed goods and services tax (GST) is set to be delayed further with the Centre and the states still undecided over the tax rates as well as the compensation for central sales tax (CST).
A fresh date for introduction of GST and its final structure and rates is now expected to be announced later this month when the empowered committee (EC) of state finance ministers holds fresh discussions with finance minister Pranab Mukherjee.
?The finance minister has requested for some more time because of his pre-occupation with the Budget. He has requested us to come back a little later with the full package on GST. Only after this discussion, will we take a view on the date for its implementation,? EC chairman and West Bengal finance minister Asim Dasgupta said after a meeting with Mukherjee on Friday.
The GST package, to be discussed ?towards the end of January? will also include talks on the revenue-neutral rate (RNR) for the tax and its threshold, Dasgupta said. The EC has indicated its dissatisfaction with the GST structure outlined by a taskforce of the 13th Finance Commission, which mooted a composite rate of 12% (7% for states and 5% for Centre), after estimating the combined RNR to be 11%. States are keen on a higher rate of 16%, with more exemptions and a higher threshold.
The EC had questioned the methodology adopted by the taskforce for arriving at RNR of 11%. It said the method of estimating the GST base at Rs 31,25,325 crore, which is the simple average of five different estimates of the base, was erroneous. The taskforce, however, says its estimate of GST base is not on the higher side and a 16% increase in RNR for states ?from 6% to 7%?would effectively make the estimate still conservative. It is being pointed out that the EC has not mentioned any specific shortcomings in the taskforce methodology. It is learnt that taskforce would, however, be sending a written reply to whatever queries raised by the EC about its report.
Meanwhile, another crucial issue in Thursday?s meeting also reached a stalemate ? that of compensating states for revenue loss from the reduction in the CST rate by 1%. In response to states? demand for a Rs 14,000-crore compensation for 2009-10, the finance ministry said it would not be able to pay all the money and states would have to absorb about 50% of the losses.
Instead, the ministry has proposed to transfer Rs 5,000 crore to states from service tax collected from 33 services, along with another Rs 4,500 crore in cash. But the idea of foregoing Rs 4,500 crore was severely opposed by states, especially as Centre is yet to clear arrears of Rs 14,000 crore for 2007-08 and 2008-09. While Mukherjee promised to look into the matter at the earliest, Dasgupta said, ?The finance ministry mentioned conditions on which there was a difference of opinion between states and the ministry. They have asked us to discuss it later again.? The issue will also be taken up at the next meeting in January.
