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States Continue To Block Indian GST

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

15 February 2011


Indian Finance Minister Pranab Mukherjee is persevering with his plans to introduce a bill to amend the Constitution in order to be able to roll out the Goods and Services Tax despite resistance from many states.

Mr Mukherjee worked hard on Friday to get all states on board for the launch of GST, however he only managed to convince 16 of them to support the tax reform move which will considerably change India’s fiscal landscape. A total of 10 states opposed the new draft.

The opposition came 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 had on Thursday 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.

The Finance Minister revealed his frustration when he said: “We have missed the timelines twice and it is my earnest request to you all (state finance ministers) that we move expeditiously and introduce the Constitutional Amendment Bill in the forthcoming Budget session”.

TAGS: tax | sales tax | India | goods and services tax (GST) | tax reform | services

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