GST Rollout Unlikely in this Budget Session

Finance minister Pranab Mukherjee is likely to disappoint those who are looking for clear schedule for the rollout of Goods and Services Tax (GST) in Budget 2012-13. In his budget speech, Mukherjee is likely to ask all parties to support the government on this major tax reform without giving any specific timeline to introduce the new indirect tax regime, a person involved in the budget making process told FE.

The person said that Mukherjee's speech would just inform Parliament that GST constitutional amendment bill was presented in the Budget session last year and currently it is vetted by the parliamentary standing committee on finance. It will not give any time line for its passage or roll out of the indirect tax reform initiative.

Though Mukherjee had indicated earlier that government would introduce GST by April 2012, he is not in a position at present to give a time line as vast differences remain over the issue. The standing committee is also unlikely to submit its report to Parliament in the Budget session.

The finance minister would highlight the implementation of negative list, which is likely to come from next fiscal. Negative list is seen as a precursor to GST and under it almost all services, except a select few, would under the tax net.

The negative list would replace the existing practice of having a positive list, where 117 items are taxed. The list is being finalised to clear the road map for the introduction of GST that would subsume all central and state taxes and levies into uniform system of taxation. Earlier this month, the empowered committee (EC) of state finance ministers has given in-principle approval to the union government to go ahead with the negative list.

In the Budget session last year, the government had introduced GST constitutional amendment Bill in Parliament. However, many states, mainly ruled by the BJP, are against the Centre’s imposing of VAT and other local levies, which are in their domain. Besides, the states are also against dispute settlement authority in the GST bill to resolve dispute between the centre and the states.

The constitution amendment is necessary as a number of taxes fall in the states’ purview, while some come under the Centre’s ambit. To come into effect, the Bill has to be passed by a two-thirds majority in both Houses and ratified by at least 15 state assemblies.

Financial Express, New Delhi, 18-01-2012