Implementation of Goods and Services Tax (GST) regime has been deferred, but the States are still seeking full compensation for the first five years of GST introduction.
GST is the new indirect tax regime which will subsume a host of tax and duties at the Central and States level.
“States strongly feel that 100 per cent GST compensation should be paid every year for a period of five years through an independent mechanism. If such assurance comes, then smaller issues can be resolved,” Sushil Kumar Modi, Chairman of the Empowered Committee of States’ Finance Minister, told reporters here.
The States have also asked for immediate release of amount provided in the Budget as compensation for phasing out Central Sales Tax (CST). CST is levied on inter-State trade of goods. It was decided that with the introduction of GST, CST will be phased out before April 1, 2010 and accordingly the rate was reduced from 4 to 2 per cent. States were supposed to be compensated for phasing out CST.
The Centre made a provision of Rs 9,000 crore in the 2013-14 Budget as compensation to States, but this is yet to be released. Modi, who is also the Deputy Chief Minister and Finance Minister of Bihar, had written a letter the Union Finance Minister P. Chidambaram on May 29 requesting for immediate release of Rs 9,000 crore to the States according to the claims for the year 2010-11.
Agreeing with Prime Minister Manmohan Singh, Modi said the GST implementation will have to wait till 2014. The GST Bill, which was introduced in Parliament in 2010, is currently being vetted by the Standing Committee on Finance. After the committee submits its report, the States and Centre would together finalise the draft and bring it back to Parliament. “Parliamentary standing committee will submit its recommendations on GST in one month. Another committee is going to be constituted for drafting of GST Bill after Standing Committee submits it recommendations,” Modi said.
The GST rollout has missed several deadlines on account of differences over contentious issue of CST compensation and design of the GST structure between the States and the Centre.