STILL WAITING FOR CONSENSUS:

In the last meeting of the Empowered Committee of State Finance Ministers that took place on Sep. 20, Madhya Pradesh had suggested an alternative GST model that would not require any amendment to the Constitution for introducing the Goods and Services Tax.

On the one hand, this alternative GST model would not require any Constitutional Amendment and on the other hand, have all the important features of the GST. This was a statement which was put forward by the Madhya Pradesh in order to attract the attention of the Finance Ministry. The fundamental nature of this model lies in giving to the states the power of collection and appropriation of service tax, which can be carried out only with the legislative measures instead of the power to levy service tax that can come only by the Amendment to the Constitution.

However, the Finance Ministry has turned down the State’s alternative GST model basically on the ground of that this model do not allow the essential features of the GST to operate. Hence, the Government seems to be in no mood to carry forward the Goods and Services Tax {GST} without the Constitutional Amendment.

Now lets have a look why this Amendment to the Constitution is required? Currently, the Centre can impose tax on goods at the factory gate and services while states can impose tax at the retail level on goods. Constitutional Amendment Bill is required to give powers to the States to levy Service Tax and the Centre to impose tax beyond production stage.

It is well known fact that a lot of things is required to be done for the introduction of the Goods and Services Tax but for the time being the priority is the finalization of the Draft Constitutional Amendments on the Goods and Services tax so that the Amendment Bill may be introduced in the Parliament. However, the fact is that still the Centre and the States are not agree on even the draft of the Constitutional Amendment Bill.

The first draft was rejected by the States on account of the proposed vesting of the Veto powers with the Union Finance Minister on state taxation issues. The revised draft of the Constitutional Amendment Bill GST drops the main issue of giving veto power to the Union Finance Minister and said the council could take a decision only when there is a Consensus. But that too failed to convince all the States as the BJP ruled states alongwith some of the allies of the UPA did not approve that on fears of losing autonomy.

Now the next meeting of the Empowered Committee of the State Finance Ministers is scheduled to take place in Goa on Oct. 27,2010.According to the Revenue Secretary Mr. Sunil Mitra - If the consensus is reached on the Bill proposed by the Centre in the upcoming meeting then the legislation could be tabled in the Winter Session of the Parliament. If it gets Parliament clearance, GST can become operational from the mid of next year.