The implementation of the long pending tax reforms in country in the form of Goods and Services Tax (GST) is not very far off as the Prime Minister Manmohan Singh indicated that efforts are being made to implement the new tax regime from April 1, 2011 at the meeting of nation’s apex planning body National Development Council on Saturday.

Addressing the Chief Ministers and the Union Cabinet Ministers who are on board of the council, Singh said, “Reform of tax structure and tax administration is another important step in resource mobilisation. The GST is especially important in this context and I would urge Chief Ministers to give full support to the effort to implement GST with effect from April 1, 2011."

The GST would replace excise and service tax at the central level and VAT at the state-level. The PM's statement comes at a time when doubts have been voiced by many NDA-ruled states over the implementation of the GST from April 1, 2011. The introduction of new indirect tax regime has already been delayed by a year due to differences among the states and the Centre. Most chief ministers were present at the NDC meeting called to review the progress of the 11th five-year Plan. The mid term review (MTR) of the 11th Plan (2007-12) was later approved by the body, which scaled down the average annual economic growth target to 8.1 per cent from 9 per cent for the five-year period ending 2012.

The introduction of GST would need constitutional amendments, which is required to be passed with two-thirds majority in both houses of Parliament, and ratification through a simple majority by at least half of the state assemblies.

As such, the support of chief ministers is crucial for radical reforms. If all members of Parliament vote in the Constitutional amendments bill, 362 members of the Lok Sabha and 161 MPs of Rajya Sabha will have to vote in favour of the bill to pass it.

Therefore, the support of the main opposition BJP is required for the passage of the Bill in Parliament.

Earlier this week, Finance Minister Pranab Mukherjee had reminded the BJP that its election manifesto during last Lok Sabha elections had promised to implement GST, if the NDA comes to

The Centre expects to table Constitutional amendments bill in Parliament in the monsoon session that began on Monday.

However, the draft of the bill prepared by the Centre is still being studied by states and they will meet on August 4 to discuss the Mukherjee had said that introduction of the GST would help double the size of India's economy to USD 2 trillion in a short span He has also assured the states that he is willing to go beyond the 13th Finance Commission's recommendations of Rs 50,000 crore compensation to states.

Mukherjee had also proposed a three-rate structure under Goods and Services Tax -- which would simplify the indirect tax regime -- under which goods would attract a 20 per cent levy, services 16 per cent and essential items a concessional 12 per cent. Revenue from GST will be shared equally between the Centre and states, implying that out of the 20 per cent tax proposed for goods, 10 per cent each would go to the Centre and the state concerned.

During the NDC meeting, pinning his hopes on good rains, the Prime Minister also said that inflation would come down to 6 per cent by December even as states called for plugging large-scale leakages in the Public Distribution System (PDS).

In his concluding remarks after a day-long meeting of the council, Singh stressed the need for quick operationalisation of the proposed Food Security Act, which would legally entitle families below poverty line to a fixed quantity of rice or wheat at Rs 3 per The recent hike in petrol and diesel prices, coupled with the general inflation of 10.55 per cent and 12.47 per cent food inflation, has generated quite a political storm that is expected to hit the monsoon session of Parliament.

"We expect to see the rate of inflation in wholesale prices to come down to around 6 per cent by December," the Prime Minister had said earlier in the day. Singh regretted that states were not paying due attention to the farm sector, which was crucial for curbing infaltion.

"This must be corrected if we want to achieve broad-based  improvement in living standards in rural areas. Better agriculture  performance is crucial for food security and would help in tackling the problem of inflation," he said.

Singh said the agriculture market laws need to be reformed to attract private investment in farm infrastructure. "We also need to facilitate intra and inter-state free movement of agriculture commodities..." he added.

However, the chief ministers of BJP-ruled states said that it was the Centre that had failed in tackling inflation, and the price rise was making life difficult for the common man.

"Inflation poses a great threat to the country's development...There is a need to understand the constant agony that millions of people are forced to undergo daily," Gujarat Chief Minister Narendra Modi On the chief ministers' suggestion, the Prime Minister proposed to form an NDC committee under Urban Development Minister S Jaipal Reddy to look into the challenges of urbanisation. The report, to be submitted within a year, would provide inputs into the 12th Plan.

Singh also accepted the suggestion for an Action Taken Report on discussions at each NDC meeting.

(PTI)