Wednesday, October 5, 2011


The Empowered Committee of State Finance Ministers will meet on October 14, the first since it returned from aEurope trip last month to study the Goods and Services Tax (GST) model there and how it can be implemented in India.
The learning from the fourcountry tour tops the agenda of the meeting, while the GST structure, the compensation package on account of the Central Sales Tax phase-out, and the information technology platform will also be discussed.
The implementation of the indirect taxation system has been stuck following opposition from some states. The Centre was expecting states opposing GST might soften their stance after seeing how GST works in other countries. But now there are indications that the 10-day tour of France, Spain, Luxembourg and Belgium might have reaffirmed the states’ beliefs about their demands on GST.
Some finance ministers have come home convinced that if countries in Europe can have multiple rates for GST so can India. For some others, the European structure cannot be compared with India.
After seeing how GST works in Europe, Empowered Committee Chairman and Bihar Deputy Chief Minister Sushil Modi has arrived at a conclusion that a rate band instead of fixed and uniform rates of taxes should be adopted in India on the lines of Europe to provide flexibility to states.
European countries have kept the standard rate at 15 per cent and there is a band ranging between 15 and 25 per cent.
Also, there is a reduced rate of five per cent. They also have an exemption threshold.
For Madhya Pradesh Finance Minister Raghavji, who has strongly opposed all the GST models suggested by the Centre from the beginning, the trip was an eye-opener. He says he realised the federal structure in Europe is much different from ours and a cash economy like India cannot adopt GST in the form suggested by the Centre.
A finance ministry official, however, said states had conveniently learnt from Europe whatever suited them, but when it came to various other things, like a dispute resolution panel with binding decisions, they felt India was different and could not copy these things.
During the tour, the ministers had met Spain’s secretary general for finance, the French minister for foreign trade, Belgium’s deputy prime minister and minister of finance, the OECD deputy secretary general, and secretary of the Eu
The implementation of the indirect taxation system has been stuck following opposition from

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