GST groundwork delay may stretch 1 April 2010 roll out deadline

At a state finance ministers' meeting in Delhi on Friday, the Tamil Nadu government urged the Centre to pay the pay the state compensation claim on account of reduction in central sales tax (CST) and implementation of value added tax (VAT), amounting to around Rs4,055.5 crore.

Tamil Nadu finance minister K Anbazhagan said the state had not received the full payment of the truncated VAT-related compensation promised by the Centre. He added that withholding of agreed compensation commitments would not inspire confidence among the states regarding a fair GST regime.

He said the proposed goods and services tax (GST) should not affect the fiscal autonomy of states, adding that this could be only ensured by keeping GST within the ambit of the mandatory provisions of Article 270 of the Constitution of India.

He called for a consensual approach to drawing the roadmap towards the GST

He said the targeted implementation date of 1April, 2010, was premature as even VAT, the precursor to GST had not been stabilized.

Anbazhagan called for working out for fair and revenue-neutral rates for states that should be worked out by the centre.

The centre's indirect tax reforms initiative also ran into opposition from key BJP-ruled states including Madhya Pradesh, Chhattisgarh and Gujarat that have expressed reservations against finance minister Pranab Mukherjee's unified goods and service tax.

Opposition to the introduction of GST could delay the GST beyond April 2010 and one state finance minister even suggested that it should not be made mandatory. However according to Asim Dasgupta, empowered committee chairman and West Bengal finance minister the target date for the GST implementation would be met.

But according to Chhattisgarh finance minister Amar Aggarwal GST implementation by 1April may not be possible as even the road map was not ready and there was no consensus on implementation of GST which should be rolled out with full preparation. He said it should not be made mandatory.

Similar objections had been raised by MP finance minister Raghavji on Wednesday at the meeting of the empowered committee.

Dasgupta, however, urged state finance ministers to resolve the pending issues expeditiously as GST implementation was critical for economic reforms. He said that though some time had been lost due to the elections, the committee was trying to work out the structure expeditiously.

He said that the deadline for finalising the structure had been set as end-August.