States reject draft bill on pan-India goods, services tax regime


New Delhi : The finance ministers of state governments Wednesday rejected a draft bill to amend the Constitution for introducing a pan-India goods and services tax regime in a major set back to launching this new unified system from the next fiscal.

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“The states do not want their autonomy on financial matters to be infringed. They have said that the draft constitution amendment bill in the present format is unacceptable,” said West Bengal Finance Minister Asim Dasgupta.

Emerging from a meeting of the empowered group of state finance ministers on the goods and services tax here, Dasgupta told reporters that some states were also apprehensive about the potential loss of revenue due to the new regime.

The remarks came after Finance Minister Pranab Mukherjee made a passionate plea to all political parties to help implement the goods and services tax from April next year by supporting the relevant bill to amend the constitution, without any further delay.

“It has to be supported now. It must be introduced in parliament in this session itself. Otherwise it will again be indefinitely delayed, since many states would be going for elections in the coming months,” Mukherjee told the Lok Sabha.

“Constitution Amendment Bill must be introduced in this session for Goods and Services Tax,” the finance minister said during a reply to a debate on rising prices, an issue which affected the conduct of business in the house for the whole of last week.

Mukherjee said the uniform tax measure to replace the central excise and state levies will also eliminate the scope of individual discretions of state and central finance ministers in imposing taxes and serve the larger goal of keeping a check on prices.

“The Bharatiya Janata Party, too, had said in its manifesto that it will introduce goods and services tax in the range of 12-14 percent,” recalled Mukherjee, adding the proposed regime was a major step toward tax reform.

Last month, during a meeting with finance ministers of state governments, the federal government had proposed a three-tier indirect tax structure that could be applied at both the state and federal level in equal measure under the new regime.

During the first year of the regime, the federal levy on essential items was proposed at 6 percent, for other items at 10 percent and for services at 8 percent. Similar quantum of levy was proposed for states.

In the second year, the standard rate for goods at federal and state levels was proposed to be reduced to 9 percent each, while the rate for essential items and services was proposed to be retained at 6 percent and 8 percent each, respectively.

From the third year on, a uniform rate was proposed not only for essential items, but also for goods and services at 8 percent each at the federal and state levels. The finance minister had also assured that no state would lose out under the new regime.