State Opinion on GST
STATE Finance Ministers have strong opinions on the GST which seems to be imminent now, as expressed in a meeting called for by the Finance Commission.
Gujarat
Gujarat government has come out with an innovative proposal to address the concerns of "manufacturing states" that the proposed destination-based tax would deprive them of legitimate tax revenue.
It is suggested that proceeds from 2 percentage points of the Centre's GST levy on inter-state transactions be transferred to states that supplied the good or service. This would ensure that the key trait of GST - as one that shifts taxes from investment and production to consumption - won't be undermined as the collection would be purely based on consumption (purchase) and the arrangement of special transfer to the producing state would be solely independent of the way the tax is structured/administered.
Bihar
Bihar government demanded a Constitutional amendment to compensate the revenue loss to states likely to be caused once the Centre implements proposed GST. Bihar Finance Minister Vijendra Prasad Yadav said consequent upon the implementation of Goods and Services Tax (GST), major changes in the condition and direction of indirect taxes cannot be ruled out.
This system is bound to have a far-reaching impact on the most important source of revenue of the States.
Any reform, howsoever progressive it may sound, cannot be adopted by the states until and unless they are convinced that this will not have any adverse impact on their revenue.
There is fear of loss of revenue to the states due to implementation of the proposed GST.
In view of present system of compensating the central sales tax, the Minister said, there is a compulsion of not accepting anything less than a constitutional solution in the matter of definite loss to the states due to GST.
If the better condition of States' internal resources is seen in this context, it would not be fair to give the major credit for this improvement to the VAT system. It was difficult to assess the condition of the economy and inflation at the time of implementation of GST and as such it is also unpredictable as to what extent this system would affect the revenue of various states.
He felt that after implementation of GST while states would not receive the central sales tax available to them, even the tax realized in the seller state on the input involved in inter-state sales would have to be transferred to purchaser state and they will have to sustain loss of revenue.
Telangana
Telangana State wants the Centre to bear any loss to the State due to implementation of the Goods and Services Tax (GST). Centre's ambitious proposal of integrated Goods and Services Tax (GST) was welcome.
"We will seek payment of tax dues pending to the state to the tune of about Rs 3,000 crore, and request the Centre to bear any loss due to implementation of the GST and excise revenues should not be clubbed with GST," E. Rajender, the State Finance Minister said.
Andhra Pradesh
Extending Andhra Pradesh Government's support to the proposed tax reforms, State Finance Minister Yanamala Ramakrishnudu demanded that the Union Government compensate the loss of revenue due to implementation of the Goods and Services Tax (GST).
He suggested the compensation mechanism should be such that there should be an independent body to release the compensation which should not leave any scope for whims and fancies of the Centre and if possible, should be made part of the constitutional provisions.
He expressed that the agricultural products should not be exempted under GST, as the loss of revenue would be considerable. In case they are exempted, a permanent production-linked compensation to the State should be provided and the successive Finance Commissions should be asked to make recommendations thereof.
The Minister demanded that Petroleum products be kept outside the GST and States should continue to levy taxes on them at present rates. As a measure of building confidence among the States by the promise of the Central Government to compensate GST loss, the Centre should release the amount of loss of revenue due to phasing out of CST.
Madhya Pradesh
BJP Government at the Centre has changed the GST scenario. Madhya Pradesh chief minister Shivraj Singh Chouhan said a consensus will be formed and the new tax regime could be rolled out as early as next year. "We have never opposed GST in principle. We were opposed to some of the provisions that were part of the earlier version of the constitution amendment Bill. We stressed the need to protect states' revenues. We also wanted that states should be collecting taxes and give centre its share."
Chouhan pointed out that the previous government's reluctance to pay central sales tax compensation to states had made states wary about depending on the centre. "But with the BJP government at the centre, I think that the challenges in implementing GST are getting removed. The finance minister has given an assurance that the concerns of states will be addressed. In a federal structure, it is important to take states into confidence. The consensus is slowly getting built. I think we should have a consensus by next year."