New Delhi: Finance minister P. Chidambaram may announce a new plan of action for implementation of the much-awaited goods and services tax (GST) in the forthcoming budget.
In his pre-budget meeting with state finance ministers on Wednesday, the finance minister indicated that if the Centre and the states arrive at a consensus regarding the design of GST, some indicative announcement could be made.
The finance minister, in November, had constituted two committees comprising central and state government officials including revenue secretary Sumit Bose to solve the two contentious issues of central sales tax (CST) compensation and the current structure of GST as envisaged by the constitution amendment bill.
The Centre and the states have already held three rounds of talks since December on this far-reaching tax reform that aims to integrate the country into a common market.
While the committee on the design of GST will hold its last round of discussions on 21 January, the committee on CST compensation has also finalized its report. The report of these two committees will then be taken up in the empowered committee meeting of state finance ministers to be held 28-29 January in Bhubaneswar.
The non-payment of CST compensation by the Centre has been a contentious issue between both side.
“The empowered committee will meet and consider the reports before arriving at a view,” said Sushil Kumar Modi, chairman of the empowered group of state finance ministers and the deputy chief minister of Bihar.
While the finance minister has been flexible on the states’ demand of having the state GST rate in a band and doing away with the dispute resolution panel, some states such as Madhya Pradesh continue to have issues over the loss of autonomy. A consensus could give a push to GST, which has missed its initial implementation date of April 2010.
In the pre-budget meeting, states demanded a reduction in the number of centrally sponsored schemes, more money under the so-called flexi-fund schemes and a reduction in states’ contribution in terms of funding of these schemes to 25% from 35%, said Modi.
According to a finance ministry statement, Chidambaram informed the states that an “extensive exercise to rationalize centrally sponsored schemes is on and that, in his personal opinion, all smaller schemes should be transferred to states”.
The B.K. Chaturvedi committee had suggested a reduction in the number of centrally sponsored schemes to 49 from 147.
The states have also demanded that those that are in a comfortable financial position should be allowed to borrow up to 4% of their gross state domestic product (GSDP). The Fiscal Responsibility and Budget Management Act does not allow states to borrow more than 3% of their GSDP.
Madhya Pradesh finance minister Raghavji, who goes by one name, said the states had demanded that 33 services should be included in the service tax “negative list” that don’t attract the levy.
During the consultations, Tamil Nadu finance minister O. Panneerselvam said states should be allowed to use the funding of the Rashtriya Swasthya Bima Yojana in conjunction with their public health insurance schemes.
PTI contributed to this story.