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Indian Chamber Hopes To Convince States On GST

by Mary Swire, Tax-News.com, Hong Kong

09 March 2011


The new President of the Federation of Indian Chambers of Commerce and Industry (FICCI), Harsh C Mariwala, has outlined several thrust areas that FICCI will be focusing on in the future to raise the business confidence of corporates, including actively pursuing the roll out of a Goods and Services Tax (GST) by making the States aware of the importance of its implementation in the national interest.

Mr Mariwala said that in the coming year, as a follow up to the Finance Minister Pranab Mukherjee’s advice to industry in his recent speech at the FICCI AGM, the Federation will be interacting closely with the State governments to remove their apprehensions regarding loss of autonomy and revenue.

He said that FICCI is confident that GST is a historic piece of reform with enormous long-term benefits to all sections of the industry. “We will do our best to convince the States that GST through lower rates of levy would benefit the consumers, industry and add to government revenues”, he said. States which are opposing have some "unnecessary fears and apprehensions” regarding its implementation, he continued, and "we will try to remove them".

The central government and the states have been engaged in talks over GST for about four years. Since 2007 the government has been trying to introduce the new tax regime, under which GST will subsume most of the indirect taxes levied centrally and by the states. The tax reform move will considerably change India’s fiscal landscape.

Mr Mukherjee has been working particularly hard recently to get all states on board, however two weeks ago he had only managed to convince 16 of them to support it. A total of 10 states opposed the new draft.

The opposition had come despite the Finance Minister agreeing to fully compensate the losses of the states due to a reduction in the rate of the central sales tax (CST). The Cabinet approved a payment of INR70bn (USD1.5bn) to the states to compensate them for this loss of revenue. Of this, INR30bn would be released this fiscal year, while the provision for the remaining amount would be made in the budget for next year.

The government had originally planned to roll out GST from April 1 last year, but a consensus could not be reached as the Bill is required to be passed by a two-thirds majority in both the houses of parliament.

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TAGS: tax | business | sales tax | India | interest | law | budget | goods and services tax (GST) | tax reform | services

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