Non-Congress-ruled states want freedom under GST

States ruled by non-Congress governments could raise hurdles for introduction of the Goods and Services Tax from next April.

During the meeting of the Empowered Group of State finance Ministers on Wednesday, most of these states have decided to oppose the draft of the Constitutional amendment, which seeks to provide veto power to the Union finance minister for the proposed tax regime.

This may hamper the government's plan to introduce the Constitutional amendment in the ongoing monsoon session of Parliament, which in turn could delay the rollout of GST.

Finance Minister Pranab Mukherjee had asked officials in his ministry to finalise the draft by August 20 so that it could be in Parliament before the session concluded on August 27, said a finance ministry official.

While Madhya Pradesh has made its opposition over losing fiscal autonomy known, states such as Gujarat that had earlier supported the GST regime are also raising the red flag now. Sources said most states wanted some modifications in the draft prepared by the Centre, while BJP-ruled states want some "tougher changes".

"The draft has been made in a manner that the states are left with no powers. We will share the details in the meeting tomorrow," said Gujarat Finance Minister Saurabh Patel.

When contacted, Kerala Finance Minister Thomas Isaac said: "We cannot agree to this draft. We cannot allow veto power to the Centre. (Moreover) the council should have a vice-chairman from the states on a rotation basis."

A fortnight ago, Madhya Pradesh Finance Minister Raghavji was the lone dissenter during the meeting of empowered committee with Mukherjee.

When contacted, Raghavji said: "States should be given full freedom to increase or lower rates as and when they want. The Union finance minister can be an executive head of the committee but cannot enjoy veto powers."

He added the Centre should provide at least one more month for states to provide a detailed response to the legal changes proposed by the Centre.

Discussions on the draft Constitutional amendment and compensation to states for losses on account of the Central Sales Tax during 2010-11 are the main items on the agenda for Wednesday's meeting.

However, GST rates suggested by the finance minister in the last meeting with empowered committee are not on the agenda at the moment.

The Centre had suggested 8 per cent rate of taxation on services and 6 per cent and 10 per cent for concessional goods and standard goods, respectively.

In the first batch of supplementary demand for grants moved today, Mukherjee has sought parliamentary approval for an additional spending of Rs 1,000 crore (Rs 10 billion) for CST-related compensation.

The progress made by the Centre on GST in the last few weeks has seen more states becoming active in the meetings of the empowered committee.

The last meeting on July 21 saw a 'never before' attendance from the states, and this time 'a bigger' gathering is expected. Many states plan to come with a full delegation, with two ministers and some officials representing the state.