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Centre, states close to sorting out GST differences: Modi

Reviving hopes that the GST could be ushered in from April 2013, Sushil Modi, chairman of the empowered committee of state finance ministers, said after a meeting with Union finance minister P Chidambaram on Thursday that a Centre-state consensus would emerge in the next 2-3 meetings of the panel on various contentious issues.

Reviving hopes that the GST could be ushered in from April 2013, Sushil Modi, chairman of the empowered committee of state finance ministers, said after a meeting with Union finance minister P Chidambaram on Thursday that a Centre-state consensus would emerge in the next 2-3 meetings of the panel on various contentious issues.

While issues like the GST rates, the threshold where the tax would kick in and the distribution of powers between the Centre and states in the GST council were discussed at the meeting, the Centre has also showed an inclination to favourably look at the states? request for a CST compensation, sources said.

?(On) many of the issues on which there was confrontation between the Centre and states, there is convergence now… I think in next 2-3 meetings, we will able to sort out differences between Centre and states”, Modi said.

Referring to the CST compensation issue, Modi said that the members of the Empowered Committee would meet Chidambaram on November 8.

The issue was also discussed with Chidambaram, he said, adding his response was positive. “…we are trying to find ways how to compensate states for CST loss”, Modi said.

There is a disagreement between the Centre and states on compensating the latter for their reduced revenue collection from the central sales tax.

The Centre maintains that there is no understanding with the states to compensate them for lower revenue in 2011-12. The finance ministry had earlier also rejected states’ demand to withdraw 12% tax on services, such as cable television and direct-to-home services, that attract state-level luxury tax.

The Centre is of the view that since some states have raised VAT from 4% to 5%, while some others have raised it to 4.75%, the compensation needs to be determined taking into account the revenue states have thus generated.

Among others, the meeting was attended by Unique Identification Authority of India (UIDAI) chairman Nandan Nilekani, revenue secretary Sumit Bose and other senior officials of finance ministry.

CST, which is levied on movement of goods from state to state, was lowered from 4% to 3% in 2007-08, and further to 2% in 2008-09 after the introduction of Value Added Tax (VAT).

States were given a compensation of R6,393 crore for 2010-11, but they are insisting on getting R12,666 crore more for the period.

States, however, are not ready to lower the compensation to the extent of the extra funds mobilised through VAT.

Chidambaram recently told a consultative committee attached to the ministry that there still are ?some issues? relating to GST to be resolved but described them as ?not insurmountable.?

He said the government’s objective is to put in place an effective and efficient tax system, which is friendly and fair to the taxpayers.

Some members of the panel felt that the issue of loss to the states should be settled to the satisfaction of all states before further steps are taken.

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First published on: 26-10-2012 at 03:48 IST
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