Because of the difficulty in passing the Constitution Amendment Bill in the current Budget session, it would not be practical to introduce GST beginning April 1, EC chairman Asim Dasgupta said after the meeting. GST ideally aims to replace a multitude to central and state taxes and duties with a single tax.
Dasgupta, however, added preparations for finalising the draft for a constitutional amendment, GST model legislation for state GST, Inter-state GST, rules, procedures and development of IT infrastructure would continue in the meantime.
The states would try to form a consensus by April on a convergent package comprising of revenue-neutral rate, list of exempted goods, among others, he said.
Now that the EC has got different viewpoints of the finance ministry, 13th Finance Commission task force on GST and the National Institute of Public Finance & Policy, states are in a better position to achieve convergence.
In its meeting with the finance minister, the EC discussed about compensation for the losses arising out of phasing out of the central sales tax (CST) for current and the next fiscal.
For 2009-10, the total compensation demand from the states is Rs 14,181 crore, of which the Centre has agreed to pay 68% or Rs 9,676 crore. The remaining one-third portion of the demand will be discussed in April, Dasgupta added.
Central sales tax is a levy on inter-state transfer of goods and was reduced to 2% from 4% with the aim of removing it completely at the time of the introduction of goods and services tax.
States are compensated by Centre for revenue losses on account of this reduction. However, now that the GST is being delayed, the states have asked for compensation for the next fiscal 2010-11 also.