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12 October 2010

States Obstruct Indian GST

The timetable for the introduction of India’s new goods and services tax (GST) is still under threat from continuing opposition in the states, where loss of fiscal autonomy is an issue still perceived as unresolved.

Madhya Pradesh finance minister Raghavji rejects outright the central government proposals for a national GST and continues to demand discussions based on his own draft GST model.

“We would not allow the Centre to impose sales tax. That’s our domain and would impact our autonomy,” he said.

Opposition has also been voiced in other BJP-ruled states, Uttar Pradesh and Tamil Nadu.

The national GST was first scheduled to be introduced in April 2010, but has had to be postponed several times to due the complexity of the reforms and continued opposition from state governments. In the 2010-11 budget it was announced that the national GST would be rolled out in April 2011. A three-tier rate structure has been proposed: 20% on goods; 16% on services; and 12% on basic items.

The central government has already conceded many points to accommodate state objections, including waiving its right to veto rate-setting proposals agreed by a consensus of states and the centre, and guaranteeing to make up losses of revenue experienced by individual states.

The empowered committee of state finance ministers is expected to meet on October 27 in Goa to try to push forward the GST agenda.

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