State FMs meet today to talk GST threshold & CST compensation

The meeting of the empowered committee of state finance ministers on the goods and services tax (GST) on Wednesday will have three important things on agenda ? the lower turnover threshold for taxpayers to come under GST, the central sales tax (CST) and, of course, the fiscal autonomy that states fear to lose as a result of the proposed constitutional amendments for GST.

An issue of concern for states ? fiscal autonomy ?would also be discussed, sparks of which could already be seen in the last meeting, sources said. While states like Madhya Pradesh and Gujarat openly voice their reservations over the fiscal powers they fear to lose, others also have similar apprehensions.

States would present their views on the constitutional amendment draft, given to them by the finance ministry. Madhya Pradesh chief minister Shivraj Singh Chauhan told FE, ?The financial autonomy that we are trying to preserve is very important. Those who are in favour of losing it in the GST regime do not understand that it could have serious implications in the future.?

In the last meeting, too, most states were in favour of ensuring fiscal autonomy. Eight states are not happy with the proposed constitutional amendment fearing loss of autonomy, say sources. Atleast 50% states should support the Bill for it to be passed.

The other issue to be discussed is the threshold for levying tax on goods and services in the GST regime.

While the Centre is pressing for a common threshold for both central and state GST, states are of the view that the central GST threshold should be higher than that for states for levying GST. The issue will be discussed in the meeting.

States had called for fixing the threshold for Central GST at the present level of Rs 1.5 crore, and raise it to Rs 10 lakh for state GST. The Centre had opposed it, proposing a common threshold of Rs 10 lakh.

Meanwhile, CST compensation and rates are also on the agenda for Wednesday?s meeting. Some states want CST to be kept at 2% while others want it cut to 1%.

Finance minister Pranab Mukherjee in the last meeting with the empowered committee discussed the plan which involves moving to a single GST rate in phases in three years beginning 2011-12.

The combined single GST is pegged at 16% by the Centre, a proposal states too have agree with. The Centre proposed that services be taxed at 8% each for both the centre and states, a lower rate of 6% for certain goods and a standard rate of 10% in the first year of GST.