In a major setback to the roll out of a national goods and services tax regime from April 1, 2010, Tamil Nadu has joined the BJP- ruled states in expressing reservations over the rate at which it would be levied and compensation to states from estimated revenue loss. GST is facing the same problem as the introduction of a state level value added tax in 2004 when several Congress ruled states opposed the BJP government at the Centre from introducing the tax.
Meanwhile, states have also sought another 2% relaxation in the FRBM norms to help them spend more in order to battle the economic slowdown. At present, under the FRBM norms, fiscal deficit of states has to amount to 3.5% of their gross domestic product. ?States have asked that it should be increased by another 1% to 2%,? Prem Kumar Dhumal, chief minister of Himachal Pradesh said.
The opposition to GST?s scheduled rollout from April next year came out at a pre-Budget meeting of state finance ministers with finance minister Pranab Mukherjee on Thursday.
?All state governments feel that issues such as the possible num ber of rates under GST and revenue neutral rates as well as concerns over compensation to state governments and loss of financial autonomy of states once the tax kicks need to be addressed before the new tax can be implemented,? a state finance minister told FE .
?Unless these concerns are addressed, it may not be easy to implement GST from April 1, 2010. Even the introduction of VAT took 2 years, so what is the hurry to introduce GST so soon?? he pointed out.
Dhumal said GST was part of the agenda of the Pre-Budget meeting, although he also remained non committal on its likely date of implementation. ?It should be the implemented at a date finalised by the Centre and the state,? he said.
The lack preparations on the ground such as having IT systems in place are also being seen as hurdles. Chhatisgarh has also pointed out that April 1, 2010 is completely unrealistic for introducing GST.
Meanwhile in a move to cajole states to accept the deadline, Union finance minister Pranab Mukherjee said, ?We also need to focus on the introduction of GST from 1st April 2010. This is a critical part of our economic reforms. I request all the Chief Ministers and Finance Ministers to resolve the pending issues expeditiously.?
?If GST is not introduced by April 1, 2010 it will be a major setback to the industry and the UPA?s reform agenda will certainly be hit. The government should try and implement it on time and the Budget should announce a roadmap for it. But at the same time, the tax should not be hurriedly introduced,? said Pratik Jain, executive director KPMG.
Concerns over the scheduled implementation of the tax was first raised by Madhya Pradesh finance minister Raghawji in a meeting of the empowered committee of state finance ministers on Wednesday.
Following the EC meeting, Raghawji and finance ministers of BJP ruled states like Karnataka and Bihar went to meet former Union finance minister under the NDA Yashwant Sinha to discuss their reservations.