The Telegraph
Friday , July 4 , 2014
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States set terms for GST rollout

Arun Jaitley with GST panel chairman Abdul Rahim Rather in New Delhi on Thursday. (PTI)

New Delhi, July 3: Non-BJP states may do what Narendra Modi’s Gujarat did to the UPA for 10 years — stall the goods & services tax (GST), which can increase the country’s gross domestic product by 1-1.5 per cent.

At a meeting with Union finance minister Arun Jaitley, states came out with demands such as continuing state levies on petro-products and a legal framework for compensating them for notional losses.

Many non-NDA states are not rejecting the proposal but are not willing to give an unconditional go-ahead.

Bengal finance minister Amit Mitra said he favoured the concept of GST but states should be compensated for losing out on revenues.

Jaitley said the Centre would sort out compensation issues, critical to the GST rollout. The minor changes demanded by the states may delay, if not nix, the reform measure.

The BJP-led government, however, can hardly complain. During the UPA regime, BJP-ruled states, led by Modi’s Gujarat, had said GST was a good move but raised procedural objections.

A few states are keen to retain octroi, which is an entry tax, though it had been earlier decided that the levy would be axed once GST was rolled in.

Jammu & Kashmir finance minister Abdul Rahim Rather, who is the chairman of the empowered committee of state finance ministers, told newspersons: “Though the government has agreed to give the states compensation for revenue losses arising out of GST for three years after its implementation, they have not agreed to include it in the constitution amendment bill as the states had demanded.”

States are also concerned about the architecture of GST. They want the Finance Commission to decide on the share of the states and the Centre from GST.

In a meeting last month, Mitra said he expected “confidence building” measures in the form of payment of past compensation. “CST was reduced to 2 per cent in 2011-12. We were to be compensated for this but are yet to receive Rs 3,600 crore,” he had said.

Analysts said states were bargaining to ensure at least some of their monetary demands were met.