Finance Minister P. Chidambaram has told the States that he would outline amendments to the Constitution on the Goods and Services Tax (GST) in his Budget speech, provided there was consensus among States on this tax reform.
Chidambaram, who met State Finance Ministers on Wednesday as part of the pre-Budget consultations, also expressed his commitment to keep the fiscal deficit within 5.3 per cent (revised target) in 2012-13 and 4.8 per cent (as a part of fiscal consolidation road map) in 2013-14, sources said.
On GST, the Finance Minister is understood to have said that it was time to wrap up the loose ends. On States’ demand of more compensation for reduction in the Central Sales Tax (CST), he said that the Centre was open to the idea, but that would depend on the fiscal situation, sources said.
He also asked States to give speedy clearance to projects falling in their jurisdiction to speed up investments.
The Constitution Amendment Bill for GST has already been introduced in Parliament. Now, a Standing Committee is examining it and is expected to submit its report by the Budget session in February.
The Centre and the States have also constituted two committees, one on design and other on CST compensation, which are expected to submit their reports by January 21.
After this, the Empowered Committee of State Finance Ministers will consider these reports in its meeting on January 28-29 in Bhubaneswar. The outcome of this meeting will determine inclusions on GST in the Finance Minister’s Budget speech.
After the meeting, the Bihar Finance Minister and Chairman of Empowered Committee of State Finance Ministers Sushil Kumar Modi said all the States demanded compensation for reduction in the CST to two per cent from the earlier four per cent.
On the other common issues, Modi said States sought implementation of the recommendations of B.K. Chaturvedi Committee on Centrally-sponsored schemes. States want their contribution in Central schemes not be more than 15 per cent as also reduction in the total number of such programmes.
Modi said there was also a demand that States with good debt-to-GDP ratio should be allowed to borrow up to four per cent of their GSDP (Gross State Domestic Product).
The Fiscal Responsibility and Budget Management Act limits States’ borrowings to three per cent of GSDP.
shishir.sinha@thehindu.co.in