Shivaji Singh Chouhan gives an affirmative view on GST applicability

Dated 11th September, 2014

In a signal that the installation of the new government at the centre has softened the stance of Bharatiya Janata Party (BJP)-ruled states on the Goods and Services Tax (GST), Madhya Pradesh chief minister Shivraj Singh Chouhan said a consensus will be formed and the new tax regime could be rolled out as early as next year.

“We have never opposed GST in principle. We were opposed to some of the provisions that were part of the earlier version of the constitution amendment Bill. We stressed the need to protect states’ revenues. We also wanted that states should be collecting taxes and give centre its share,” said Chouhan while interacting with reporters at a conference organized by industry lobby Confederation of Indian Industry, ahead of the global investor summit to be organized in Madhya Pradesh in October.

BJP-ruled states of Madhya Pradesh and Gujarat and AIADMK-ruled Tamil Nadu have been opposing the provisions of GST, fearing loss of revenue and autonomy. But hopes of an early rollout have revived after finance minister Arun Jaitley said the centre will address the concerns of states and will look to table the constitution amendment Bill in the winter session of Parliament.

“The prospects have improved for GST with the new government coming in the centre with a good majority. The Madhya Pradesh chief minister sounds so positive because there seems to be a structured solution for the main issues that concerns the state,” said Amit Sarkar, partner, Grant Thornton India Llp. “Be it the issue of compensation, loss of autonomy, the jurisdiction of the state-level tax officers or the revenue neutral rate, each of these issues have a potential solution.

"GST is an indirect tax reform that aims to remove all barriers between states and integrate the country into a common market.

Chouhan pointed out that the previous government’s reluctance to pay central sales tax compensation to states had made states wary about depending on the centre.

“But with the BJP government at the centre, I think that the challenges in implementing GST are getting removed. The finance minister has given an assurance that the concerns of states will be addressed. In a federal structure, it is important to take states into confidence. The consensus is slowly getting built. I think we should have a consensus by next year,” he added.

Jaitley has assured states that the centre will compensate for losses incurred because of the phasing out of central sales tax.

States want petroleum and liquor to be kept out of GST in the constitution amendment Bill. They also do not want entry tax that is levied and collected by a local body to be subsumed under GST. They also want a formal mechanism for compensation of losses arising out of GST implementation to be part of the constitution amendment Bill.

On the global investor summit, Chouhan said the government is looking to attract both domestic and foreign investment into the state as it looks to surpass the Rs.1.15 trillion investment that it received last year. The state government has invited Modi to inaugurate the summit to be held between 8-10 October.