The Union government?s plan to set up a dispute settlement authority (DSA) with representation of states to resolve differences among various stakeholders in the proposed goods and services tax (GST) regime could come to nought.

Sources say most states have opposed the mechanism while submitting their views to the Parliamentary Standing Committee vetting the GST constitutional amendment Bill. These states governments, irrespective of their political affiliations, feel that such an authority would erode their fiscal autonomy. The Bill was introduced by finance minister Pranab Mukherjee in the Budget session this year.

The DSA, as proposed in the Bill, would deal with grievances of the Centre and the states with regard to GST. The body would consist of a chairperson and two other members. The chairperson will be one who has been a judge of the Supreme Court or a Chief Justice of a High Court, while the members shall be persons of ?proven capacity and expertise in the field of law, economics or public affairs?.

However, states feel that such issues can be resolved through consensus between the Centre and the states, rather than a DSA with such level of authority.

When contacted, Chairman of the Empowered Committee of State Finance Ministers Sushil Modi said: ?Individually, many states have expressed their views against the DSA. The consolidated view of the states would be sent to the standing committee by the end of this month.?

The GST, a destination-based tax on consumption, would entail giving equal powers to the Centre and the states in levying taxes. While the Centre will get powers to tax sales of goods (it now taxes only manufacturing, with the excise impost), states will be able to tax services in the GST regime.

The constitutional amendment Bill has to be passed by a two-thirds majority in both Houses of Parliament and ratified by at least 15 state assemblies to take effect. Parliamentary Standing Committee on Finance chairman Yashwant Sinha had said the states must be on board on all issues pertaining to the indirect tax reform initiative. ?You cannot implement GST without the support of all states. So consensus-building is absolutely essential,? he had said.

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-ruled states. It has already missed the two deadlines of April 2010 and April 2011. Now, the government wants to implement it sometime next year.

To take the process of GST rollout forward, the Empowered Committee of State Finance Ministers is meeting on October 14 in the capital. According to Modi, since the GST Bill is currently with the committee, the role of states is limited now. “We will discuss GST. Besides, there would also be discussion on VAT-related issues,” he said, referring to the October 14 meeting.

The panel would review the experience of some states in imposing VAT on textiles, sugar and tobacco, after the Centre scrapped the additional excise duty on these items with effect from April 1, 2011. These items were exempted from VAT so far due to collection of additional excise duty by the Centre on them. The states used to get 1% tax under the revenue-sharing mechanism between the Centre and the states.