Saturday, August 21, 2010

India Tax reform delayed due to disagreements between state and central government

The Goods and Services Tax, which the Indian government was supposed to implement within April 2011, has been pushed further back due to difference between state government and central government.

Though Indian states that are ruled by Congress supported the tax, BJP states, Tamil Nadu and Uttar Pradesh are not supporting it which forced the central government to postpone its current deadline and adopt a slower approach.

The GST bill is a major tax reform in the country’s history but several states objected against the bill for it hurts their autonomy. Under the new tax reform, instead of having different state taxes and central taxes such as excise duty, service tax, and VAT, there will be one type of tax around the country but this means increasing center’s power.

The proposed GST bill would provide the federal finance minister veto power over state tax matters which did not go well by the state governments. Initially, opposing MPs asked for two-days time to think about the matter but after two days, they are asking for more time to study the constitutional amendments introduced in the draft.

Indian Finance Minister, Pranab Mukherjee, was frustrated over the matter. News reports said that in private gatherings, he said that it was pointless to introduce the bill for there was consensus.

The government is considering October 2011 as the new deadline if all the parties agree. It is now planning to come up with a third revised draft.

No comments:

Post a Comment