Hindustan Times (Jalandhar)

RS panel bats for 5-year revenue compensati­on to states for GST rollout

UNIFIED MARKET Select committee wants moderate rates to prevent inflation, gives mechanism for diluting 1% entry tax

- HT Correspond­ent letters@hindustant­imes.com

NEW DELHI: A Parliament­ary panel is understood to be in favour of compensati­ng states for at least five years, to offset any potential revenue loss after the rollout of the Goods and Services Tax (GST), which aims to make the country a unified market.

The panel is also understood to have recommende­d keeping the GST rates moderate to ensure that the new tax system is not inflationa­ry.

The Constituti­on Amendment Bill to roll out GST was passed in the Lok Sabha in May, but was referred to the Rajya Sabha select committee on Opposition demand.

The new system, if implemente­d, will dramatical­ly alter the country’s tax administra­tion by replacing a string of central and local levies such as excise, value-added tax and octroi with a single unified tax.

Since GST is a “destinatio­n based” and is levied at the place where goods and services are consumed, there was a fear that this could potentiall­y give more revenues to consuming states such as UP, Kerala and West Bengal compared to producing or industrial­ised states such as Maharashtr­a, Gujarat or Tamil Nadu.

The government has offered to compensate states fully for the first three years, 75 % of revenue loss in the fourth year and up to 50% in the fifth year.

The Bill passed in the Lok Sabha provided for an additional tax of 1% above the GST for a maximum period of two years to compensate any revenue loss to “producing” states.

Sources said that the Rajya Sabha panel has said that the provision of the 1% additional tax in its current form could lead to a “cascading effect”.

The panel, it is understood, has suggested that the 1% entry tax should be made applicable only in the case of inter-state supply of goods. This means that this additional tax will not be applicable for intra-company movement of goods across states.

T he select committee’s Congress members, who are understood have written a dis- sent note on the panel’s report, wants the GST rate capped at 18% and specified in the bill itself and removal of the “entry tax” of 1%.

It also wants tobacco and electricit­y surcharge kept within the GST, a move that will deprive the states of extra taxes from two major revenue sources.

The report will likely be tabled in Parliament over the next few days.

Finance minister Arun Jaitley had said the new rate will be much lower than 27% that states are said to have been pushing for.

Newspapers in English

Newspapers from India