Earlier on Monday, Jaitley met state Finance Ministers as a pre-budget exercise. The meeting lasted for more than three hours.

Jaitley said that some ‘vexatious’ issues remain that need to be addressed for implementation of the new tax regime.

“Implementation of GST has the potential to significantly improve the growth story. Many of you would recall that a decision to implement GST was taken in 2007-08 and an empowered committee was formed for building consensus on this issue,” Jaitley said during the meeting attended by Finance Ministers of all states and union territories.

“I have been informed that on many issues convergence of views has happened and there are some vexatious issues which only need resolution. I wish and hope that these will be sorted out sooner than later,” he said.

The Finance Minister said a consensus needed to be evolved for successful implementation of the GST.

With a view to grant greater autonomy to states, Jaitley said the funds for Centrally Sponsored Schemes would be routed through the state governments.

“Flexi funds” as part of this decision also exist to tailor the scheme implementation to meet the local requirements, he said.

“I urge all of you to use this forum for making suggestions for improving implementation of various welfare programmes of the government,” Jaitley added.

GST: Compensation for revenue loss remain an issue with states

Meanwhile, most of the states favoured implementation of GST, but raised concerns with regard to safeguard of fiscal autonomy and compensation for revenue loss due to phasing out of the central sales tax (CST). The state government also pitched for increasing borrowing limit so that more investments can be done.
Gujarat Finance Minister Saurabh Patel: As regards GST, most of the states have welcomed it today. Only thing that states were looking for was the CST compensation and protection in revenues.

Tamil Nadu Finance Minister O Panneerselvam: A consultative approach is needed to arrive at a just and fair solution to GST imbroglio. Tamil Nadu is also concerned about the impact of the proposed GST council on the fiscal autonomy of states and the huge permanent revenue loss it is likely to cause to a state like Tamil Nadu, which is a net exporter with large manufacturing industry. The Centre needs to recognise the need for independent compensation mechanism for revenue losses suffered by states. It should permit states to revise CST upwards to 4 percent in absence of implementation of the GST.

Rajasthan Chief Minister Vasundhra Raje: The state government will take all the required steps to see that the GST is implemented in the state with effect from April 1, 2015.
Assam Chief Minister Tarun Gogoi:  Introduction of GST may be synchronised with the commencement 15th Finance Commission award period i.e. April 1, 2015. Petroleum products should be kept out of its purview. In order to allay apprehensions of states about future revenue loss on account of introduction of GST, there should be constitutionally mandate compensation mechanism.
West Bengal Finance Minister Amit Mitra: We favour the roll-out of the comprehensive indirect tax mechanism with certain conditions. The Centre should compensate for the revenue loss to states on account of phasing out of CST. Centre promised us to give Rs 3,600 crore as compensation, but we are yet to receive it.

Haryana Finance Minister Harmohinder Singh:
We demand for CST compensation of Rs 4,150 crore to be paid to the state.
Madhya Pradesh Finance Minister Jayant Malaiya:
States are not getting CST compensation since 2010-11. For three years MP has not got its share of Rs 465 crore from government of India under CST compensation.

Bihar Finance Minister Vijendra Prasad Yadav: We demand special status for Bihar. Besides, a new formula should be worked out for calculating CST compensation.

Chhattisgarh Commerce and Tax minister Amar Agrawal:
The Planning Commission, in its Indian Human Development Report 2011, had adjudged Chhattisgarh as one of the most backward states on the basis of human development index. Moreover, Chhattisgarh has the highest ratio of below poverty line (BPL) families in the country (39.9 percent).Therefore, we demand for a 'special category' status for the state.


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