In a surprise move, the Empowered Committee of States’ Finance Ministers on Goods and Services Tax elected Finance Minister of Jammu and Kashmir Abdul Rahim Rather as its new Chairman.

Rather’s name was proposed by Delhi Chief Minister Sheila Dixit (who also hold’s the Finance portfolio). Rather was then chosen unanimously. The entire process took place in the presence of Union Finance Minister P. Chidambaram.

The election was necessitated after the resignation of previous Chairman Sushil Kumar Modi. Modi quit after a split in the JD (U)-BJP Government in Bihar, in which he was the Deputy Chief Minister and the Finance Minister.

The new Chairman will have the formidable task of pursuing the proposed new indirect tax regime under the Goods and Services Tax (GST), which will subsume excise, service tax and local levies.

The Standing Committee on Finance had last week finalised its views on the GST Bill, which was introduced in Parliament in 2010. The States and the Centre would together finalise the draft now and bring it back to Parliament.

Announcing Rather’s election, Chidambaram said that the Constitutional Amendment Bill has been sent to the Law Ministry for approval. It will come back to the empowered committee for approval.

The Bill aims to confer simultaneous power on Parliament as well as the State Legislatures, including every Union territory with a legislature, for levying goods and services tax on every transaction of supply of goods or services or both.

“Either by an amendment or we will withdraw it and introduce this one. It depends on what the Law Ministry says,” Chidambaram said when asked if this will replace the Bill that was with the standing committee.

“Let the Constitution Amendment Bill Draft be approved first then the Parliamentary law must be approved. At least we are moving forward,” he added.

Later, while talking to media, Rather said the critical issue was the Constitution Amendment Bill.

“The bigger issue right now is to get the Constitutional Amendment Bill. The Centre can levy sales tax and the States can levy service tax only through the Constitutional Amendment Bill.”

Rather said he could not give a deadline for the implementation of GST as there are still many issues like compensation to States, and autonomy that need to be discussed further. He reiterated that no state was against the new indirect tax regime. However, there were issues and the effort will be to accommodate all, he added.

Though the Centre has clearly indicated that GST would be implemented only after 2014, Rather refused to give any new time line.

The original deadline for rollout was April 1, 2010, but that, and subsequent deadlines were missed due to differences between the States and the Centre over the contentious issue of Central sales tax compensation to States and design of the GST structure.

(This article was published on July 22, 2013)
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