CONSENSUS,THE ULTIMATE REQUIREMENT

The upcoming meeting of the Empowered Group of State Finance Ministers which is scheduled to take place in Goa on Oct. 30 will decide the fate of Goods and Services Tax to a great extent.

The roll out of the GST has already missed the earlier deadline of April 1,2010 and now it has almost becomes clear that we have to wait more for the new tax regime which is expected to replace excise duty , service tax on the Centre’s end  and VAT on the States front, besides local levies ,cesses and surcharges.The Government failed to tabled the Constitution Amendment Bill in the monsoon session of the Parliament as the BJP-ruled states raised their voice against the revised draft of the Centre on theConstitution Amendment Bill. 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 the Parliament clearance ,GST can become operational from the mid of the next year as GST is a transaction based tax. This is what our Government is basically looking for now.

If we go with the recent statements of Mr.Asim Dasgupta, the Chairman of the Empowered Group of the State Finance Ministers , then this meeting will definitely brings some fruitful results as the consensus is expected to be buildon the draft of the Constitutional Amendment Bill.

However, the news from the Finance Ministry is not looking favourable. Having already compromised a lot to accommodate the concerns of the States, the Centre is unlikely to propose a fresh set of Constitutional Amendment to facilitate the Goods and Services Tax. Now the burden is all on the States to take forward the process of the GST in the upcoming meeting.

The first draft on the Constitution Amendment Bill was rejected by the Empowered Committee of the State Finance Ministers  because it proposed to give Veto Power to the Union Finance Minister on the State taxation issues. However, the revised draft from the Finance Ministry drops the main issue of giving Veto Power to the Union finance Minister and said that the Council could take a decision only when there is a Consensus.But the BJP-ruled States along with some of the allies of the UPA, have been opposing the revised draft of the Constitutional Amendment Bill on GST and asked for more time to study that and give their views on the various provisions in the GST Bill . Also, they wanted to know the clear meaning of the consensus and suggested changing the word with “consent”.

The upcoming meeting of the Empowered Group of State Finance Ministers will discuss the Constitution of Goods and Services Tax (GST) Council and Dispute SettlementMechanism.An effective dispute settlement mechanism is necessary for the smooth functioning of GST and this would helps to bring uniformity across States and the Central GST.

After such a standpoint of the Finance Ministry on the GST regarding no more steps backwards  and the States constant view of making some more changes in the Draft , may make the rollout of the Goods and Services Tax difficult even in the mid of the next year.