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  3. States clear another obstacle in GST implementation; gives nod to negative list

States clear another obstacle in GST implementation; gives nod to negative list

10 Jan 2012 Evaluate

Another hurdle in the implementation of Goods and Services Tax (GST) seems to have cleared as the Empowered Committee of State's finance ministers on GST gave an in-principle approval to the concept paper of taxation of services based on the negative list. Though there still remain some disagreements between the Central government and the states, however, the committee reached consensus on a negative list on which there will be no central tax.

The Union Government can now fast track the process of GST and implement it from April 1, 2012, which would subsume all Central and state taxes and levies into uniform system of taxation, provided it first resolves the disagreements with states. The existing practice of having a positive list where about 120 items are taxed is likely to be replaced by the negative list prepared by state finance ministers and many more services would be brought under the purview of tax regime, which will help in further widening the tax base.

Deputy Chief Minister of Bihar, Sushil Kumar Modi who chaired the committee has recommended that all those items mentioned in the Constitution's schedule II should be included in the negative list so that Union Government cannot impose tax on them. The empowered committee also deliberated on defining services and felt that all kinds of economic activities barring goods, money and immovable property should be considered as part of the services.

While the matter related to implementation of the proposed GST regime is pending with the Standing Committee of the Finance Ministry and States like Uttar Pradesh, Tamil Nadu, Madhya Pradesh and Gujarat among others have major objections to its introduction. As part of an earlier move towards GST regime, the states have estimated a loss of Rs 19,000 crore in revenues after the Central Sales Tax (CST) was reduced. The negative list will include services such as funeral, burial and mortuary agencies, interest paid on deposits by bank, dividend on investments, and passenger travel in public transport among others.

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