Mukherjee promises robust compensation to states for timely roll out of GST

In a bid to speed up talks on unified goods and services tax (GST), finance minister Pranab Mukherjee yesterday reached out to his counterparts in state governments, promising ''robust compensation'' to ensure timely roll out of the crucial indirect tax reform.

Asim Dasgupta, West Bengal FM and chairman of the empowered committee of state finance ministers said Mukherjee communicated with the state government saying he was prepared to go beyond it (the 13th Finance Commission recommendation of Rs 50,000 crore compensation over next five years). 

"A finance ministry representative communicated that the union finance minister has sent a message... he will stand by states during implementation of GST to protect any revenue loss,'' he said.

However, according to a central government official the compensation offer was contingent on the states accepting the centre's suggestion of common threshold, common exemption list and uniform goods and service tax rate.

The official did not however elaborate on what could be the likely compensation as he said it would depend on the agreed GST rate.

He added that the draft of the proposed constitutional amendments required for GST implementation would be sent to state finance ministers over the fortnight by the law ministry. Constitutional provisions would need to be amended to empower the centre to tax goods at the trade level instead of factory gate and states to tax goods at the trade level instead of factory gate and states to tax services.