New Delhi, Dec. 11: State finance ministers today rejected the draft GST bill, throwing this shining piece of economic reform into fresh uncertainty.

The optimism from finance minister Arun Jaitley's assurance yesterday on compensation to states for the proposed goods and service tax (GST) disappeared as the empowered committee of state finance ministers today objected to two critical pieces of reform - bring petroleum products under the tax ambit and snuff out state-level entry tax on goods. Besides, the states wanted higher compensation for notional losses in revenue.

'There is no consensus between the Centre and states on these three things (compensation, petrol tax and entry tax). The empowered committee is not supporting the bill without these three things,' empowered committee chairman Abdul Rahim Rather, who is also the finance minister of Jammu & Kashmir, said.

The central government wants to roll out the GST by April 2016, and in a bid to win over states, finance minister Arun Jaitley yesterday promised to pay states a compensation of Rs 11,000 crore this fiscal for losses suffered for a reduction in central sales tax.

A late night PTI report said some headway had been made following another meeting between the finance ministers and Jaitley. Sources said the Centre had offered an olive branch on entry tax and petroleum products. The Centre, the sources said, has assured the states that they would be compensated for all possible revenue losses in whatever form they want.

'We have made some headway. We will meet the union finance minister again in a week's time,' Rather told reporters

The states want compensation for any loss of revenue because of GST for five years instead of three years as offered by the Centre. They want a clause mentioning the compensation be included in the constitution amendment bill.

The states are also reluctant to bring petrol and diesel within the ambit as the tax is currently levied at a floor rate of 20 per cent and the states earn about 35 per cent of their sales tax collections from these petroleum products.

'The central government has not agreed to our recommendation on these issues,' Rather said.

Another area of contention is the purchase tax levied by states on surplus grains sent outside their borders.

States also want a higher rate of GST, a proposal the Centre has rejected as it feels this could affect business.

Officials said the central government wanted to levy central GST at 12.77 per cent and hoped to place the bill in the current session of Parliament.

The GST constitutional amendment bill, which was introduced in the Lok Sabha in 2011, has lapsed and the NDA government has come out with a new draft bill. Rather said the draft of the new bill, which was received by the committee earlier in the month, did not take on board the suggestions of the state finance ministers.