Finance Minister Arun Jaitley will meet state government representatives on Thursday in a bid to build a consensus on the Goods and Services Tax (GST). The government wants to roll out the GST by April 2016.
Here is your 10-point cheat sheet to the story:
1) The GST will cut down the large number of taxes imposed by the central government and states and will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses.
2) But many state governments have been opposing the introduction of the GST Bill because they fear it will lead to a loss of revenue.
3) In particular, states want petroleum, alcohol and tobacco to be kept out of the purview of the GST as these items account for a major portion of tax revenues.
4) There is no consensus on the final GST tax rates yet and recommendations vary from 16 per cent to 27 per cent.
5) The GST roll out has missed several deadlines because of lack of consensus among states over such crucial issues.
6) The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011, has lapsed and the Modi government will be required to come up with a fresh bill.
7) The government needs to take states on board because the GST Bill requires the consent of 50 per cent of states for implementation.
8) In a bid to assuage state governments' concerns, Mr Jaitley on Wednesday announced a proposal to pay Rs 11,000 crore as part payment of dues towards central sales tax compensation pending from 2010-11. This is roughly one-third of the total dues. The balance amount will be paid starting next financial year, Mr Jaitley said.
9) The Finance Ministry has also proposed to compensate states for three years for losses they may incur on account of switching to the GST regime, as against a demand for five-year compensation.
10) If successful, economists say the implementation of GST could add 2 percentage points to GDP growth.
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