The parliamentary standing committee on finance will meet various stakeholders next month to get their final view on the Goods and Services Tax (GST) constitutional amendment Bill. The panel is likely to submit its report in the next three months so that it could be taken up by Parliament for consideration in the monsoon session.
According to sources, the panel would meet finance ministry officials on June 8, followed by a meeting of the empowered committee of state finance ministers and other stakeholders. ??Before finalising the report, we want to hear final views of states, Centre and industry on the issue,?? a member of the standing committee said.
However, GST is unlikely to be implemented from the next fiscal even if the modified GST constitutional amendment Bill is introduced the monsoon session. This is because the legislative process will take some time and there is conflict between the Centre and the states on many issues.
Ernst & Young tax partner Bipin Sapra said that states? objections on issues like the central sales tax (CST) compensation and dispute settlement authority need to be addressed. ??Even after all issues get resolved, passing of the constitutional amendment Bill will take at least 6 to 9 months. So, GST can be implemented earliest by mid-2013-14,?? he said.
After the constitutional amendment Bill is passed by a two-third majority in both the Houses, it needs ratification of at least half of the states. The constitutional amendment is crucial as it seeks to confer simultaneous powers on the Centre and states to levy taxes on goods and services. At present, the Centre cannot impose duty beyond the manufacturing stage and the states cannot levy tax on services. After the passage of the Bill, the empowered committee of state finance ministers and the Centre will work on preparing the GST Bill.
The government introduced the GST constitutional Bill in the budget session last year, after which it was referred to the standing committee. However, much progress could not be made in finalising the report as the panel was busy with another major tax reform initiative – Direct Taxes Code (DTC). It had submitted its report to Parliament on the DTC Bill in the budget session this year.
The proposed GST will subsume most indirect taxes, like excise duty and service tax, at the central level and VAT at the state level, besides local levies. The implementation of GST has been hanging fire for the last four years, mainly due to opposition by the Bharatiya Janata Party-(BJP) ruled states. It has already missed the deadlines of April 2010, April 2011 and April 2012.
There is also a conflict between the Centre and the states on the CST compensation issue. The Union finance ministry is unwilling to compensate states beyond 2010-11 for losses incurred due to reduction of CST. It is a tax on inter-state movement of goods, which was reduced from 4% to 3% in 2007-08, and further to 2% in 2008-09 after the introduction of VAT. Besides, the states are also against inclusion of a dispute settlement authority (DSA) in the GST constitutional amendment Bill to resolve differences between states and the Centre. The states believe that DSA will hamper their fiscal autonomy.
Meanwhile, the Union government has taken some decisions to prepare the ground for the implementation of GST. The Cabinet has approved the rollout of the Goods and Services Tax Network, which would provide the IT infrastructure for GST. The Centre and states are working on the network and it is likely to be operational by August this year. Besides, in the Union Budget 2012-13, the government has announced to introduce a negative list on services, under which, barring few, all services would be taxed. It has replaced the positive list where around 120 services were under the tax net.
