GST rollout hinges on compensation to states: Sushil Kumar Modi

Sushil ModiModi attempted to allayed fears that tax rates would not rise after GST. (Reuters)

The rollout of Goods and Services Tax (GST) would largely depend on the Centre agreeing to compensate states for the revenue loss they would incur, Chairman of the Empowered Group of State Finance Ministers and Bihar Deputy Chief Minister Sushil Kumar Modi said today.

"The biggest stumbling block to GST roll-out in the country is the issue of compensating the states which would lose revenue once the tax is introduced as all other indirect taxes will be subsumed", Modi told an interactive session organised by Bharat Chamber of Commerce here.

He said that an independent mechanism should be devised for compensating the states.

"If the Centre agrees to compensate the states over a period of five years, then the roll out can be done in six months", Modi said. This was the issue where the consensus could not be arrived at, he said.

To a query, he said that tax exemptions to special category states like Uttarakhand, Himachal Pradesh and the north-eastern regions would continue after introduction of GST.

Modi attempted to allayed fears that tax rates would not rise after GST. He also sought suggestion from the chambers on ways to deal with entry tax, dual control, threshold limit, octroi and exemptions under the GST dispensation.

The GST rollout has missed several deadlines on account of differences over contentious issue of CST compensation and design of the GST structure between the states and the Centre.

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