Manmohan Singh-led government’s plan to see through a long-pending tax reform to roll out a national goods and service tax (GST) is facing a fresh roadblock. GST, which is scheduled to be effective April 1, 2015, requires a constitutional amendment, which the government hoped to push through in the upcoming winter session of the parliament.
However, negotiations in the empowered committee (EC) meeting on Monday hit an impasse with the state governments rejecting the inclusion of petrol and liquor under its ambit. Both the products generate huge local taxes for state governments which do not wish to let go of the booty. The states are also against the proposed move to subsume entry tax in GST.
The EC of the state finance ministers is scheduled to meet in mid-November to take a final call on the matter which would decide if the responsibility of the constitutional amendment will be carried over to the next government which will take over the reins after the general elections in 2014. Some have already voiced their view that the crucial amendment is best left to the new government.
Representatives of the state governments had earlier given their in-principle nod to keep petroleum and alcohol within GST. But they have now taken a U-turn.
Rollout of GST has missed several deadlines in the past as the central government and the states have failed to bridge their differences over various issues.
GST is seen as a major tax reform to herald a single national tax against separate local taxes imposed by state governments. Single GST will bring down cost of business in the country.
(Edited by Joby Puthuparampil Johnson)