Business
Updated : Mar 19, 2018, 05:47 AM IST
What the Bill entails?
The Centre will provide full compensation for the loss of revenue to the states for the first three years.
Later partial compensation will be provided. Entry tax will also be subsumed into GST
The compensation due to the states on the central sales tax reduction may also figure in the Constitutional amendment Bill
In a move aimed at sending strong signal and reiterating its pro-reform stance, the government is preparing to table the Bill on the Goods and Services Tax (GST) on Monday. GST is slated to be rolled out on April 1, 2016.
Finance minister Arun Jaitley had been trying to form a consensus with states on the important legislation that is likely to boost country's GDP by 2%. The key demands of the states were to introduce the commitment on the compensation of central sales tax, which has been pending since the last four years.
As per the agreements, the Centre will provide full compensation for the loss of revenue to the states for the first three years. Later partial compensation will be provided. Entry tax will also be subsumed into GST.
Sources say that the compensation due to the states on the central sales tax reduction may also figure in the Constitutional amendment Bill for the GST rollout.
Experts claim the UPA government had lost the faith of the state governments as it did not give the amount due to the states after a 2% reduction in the central sales tax after 2010. The payables have gone up to Rs 50,000 crore, out of which the NDA government may give the state Rs 11,000 crore in the current fiscal.
Former chairman of the state finance ministers panel Sushil Modi told dna, "It is just a matter of trust deficit between the states and the central government, which developed during the UPA regime as it went back on its commitment on the compensation for the CST cut. The empowered committee never demanded this earlier. However, the very fact that the commitments were not honoured earlier have now created a situation wherein the states are jittery."
GST is a Constitution amendment Bill, which requires two-third majority in Parliament. Once the GST is implemented, the state governments will have to face some revenue loss. They need an assurance that the Centre will compensate the amount forgone by the state governments.