Chief economic adviser Raghuram Rajan (right) and CII president Adi Godrej at a pre-budget meet in New Delhi on Wednesday. Picture by Prem Singh
New Delhi, Jan. 16: Finance minister P. Chidambaram today indicated that the government would continue to pursue reforms and he might outline the constitutional amendments relating to the goods and service tax (GST) in the budget if there was consensus among the states.
At a pre-budget consultation with state finance ministers, Chidambaram said he was ready to include the outlines of the GST amendments in his budget speech if the states agreed. State finance ministers made it clear that they would like to see a phased implementation of the new tax regime worked out in consultation with them.
Bihar finance minister and chairman of the empowered committee of state finance ministers Sushil Kumar Modi said all the states demanded compensation for the reduction in central sales tax (CST) to 2 per cent from 4 per cent. CST is expected to be scrapped when GST is introduced.
“All states raised their own issues, but there were certain issues which were raised by all of them,” Modi said.
Chidambaram told the state finance ministers that it was time to tie the loose ends on GST, and the Centre was open to the demand for more compensation depending on the fiscal situation.
Bengal finance minister Amit Mitra said his state would seek to see “sales tax removed in a phased manner with adequate compensation for the states”, adding that there should be no unilateral decisions by the Centre.
India Inc demand
India Inc, in a separate meeting with Chidambaram today, pitched for status-quo in excise and customs duty structures, while seeking changes in personal income tax slabs.
Naina Lal Kidwai, president of Ficci, said the maximum rate of 30 per cent should be made applicable on income above Rs 20 lakh against the threshold of Rs 10 lakh now.
According to Kidwai, higher tax will discourage entrepreneurship and prompt professionals to relocate to low-tax domiciles such as Singapore, Dubai or London.
“In the context of the poor fiscal condition... we want the present rates of excise and service taxes be maintained,” CII president Adi Godrej said.
On the proposed inheritance tax, Godrej said any such new levy would dampen sentiments and not contribute significantly to the exchequer.