GST: Like BJP states,TN too turns naysayer

In a major setback to the rollout of a national goods and services tax regime from April 1,2010...

In a major setback to the rollout of a national goods and services tax (GST) regime from April 1,2010,Tamil Nadu has joined the BJP-ruled states in expressing reservations over the rate at which it would be levied and compensation to states from estimated revenue loss. GST is facing the same problem as the introduction of a state-level value-added tax in 2004 when several Congress-ruled states opposed the BJP government at the Centre from introducing the tax.

Meanwhile,states have also sought another 2 per cent relaxation in the FRBM norms to help them spend more in order to battle the economic slowdown. Under the current FRBM norms,fiscal deficit of states has to amount to 3.5 per cent of their gross domestic product. States have asked that it should be increased by another 1 to 2 per cent, said Prem Kumar Dhumal,chief minister of Himachal Pradesh.

The opposition to GSTs scheduled rollout from April next year came out at a pre-Budget meeting of state finance ministers with Union finance minister Pranab Mukherjee on Thursday. All state governments feel that issues such as the possible number of rates under GST and revenue-neutral rates as well as concerns over compensation to state governments and loss of financial autonomy of states once the tax kicks need to be addressed before the new tax can be implemented, a state finance minister told The Financial Express.

Unless these concerns are addressed,it may not be easy to implement GST from April 1,2010. Even the introduction of VAT took two years,so what is the hurry to introduce GST so soon? he pointed out. Dhumal said GST was part of the agenda of the pre-Budget meeting,although he also remained non-committal on its likely date of implementation. It should be the implemented at a date finalised by the Centre and the states, he said.

The lack of preparations due to reasons such as not having IT systems in place are also being seen as hurdles. Chhatisgarh has also pointed out that April 1,2010 is completely unrealistic for introducing GST. Meanwhile,finance minister Pranab Mukherjee said,We also need to focus on the introduction of GST from 1st April 2010. This is a critical part of our economic reforms. I request all the chief ministers and finance ministers to resolve the pending issues expeditiously.

(FE)