States likely to ask for degree of fiscal autonomy in GST

States feeling their fiscal autonomy would be threatened with the introduction of the uniform tax structure are expected to drive tough bargains for a flexibility approach on proposed Goods and Services Tax a their meeting with the union finance minister scheduled for 21 July.

According to Andhra Pradesh chief minister K Rosaiah, strict harmonisation of the tax structure across the country would hit the states' fiscal autonomy.

He had stated that the states would not be able to independently take any decision to mobilise additional financial resources by taking recourse to increase in the rates of taxes.

"States should be given power to impose supplementary taxes, for instance state excise, on goods, kept outside the GST, i.e., liquor and on petroleum products so that there can be some degree of flexibility to raise additional financial resources in times of need," Rosaiah had said.

GST, to be implemented from 1 April, 2011, would replace the excise duty and service tax at the central level and value-added tax at the state level, as also the cess, surcharges and local taxes.

Analsysts say, state governments would likely bargain for retentation of some degree of control over tax matters in order to be able to raise resources to implement their social and economic programmes.

The states have also asked for adequate constitutional safeguard from the automatic prevalence of union laws over state laws in the event of any conflict with the subject under the Concurrent List.