The Empowered Committee of state finance ministers on Monday unanimously decided to keep petroleum and alcohol out of the proposed Goods and Service Tax (GST) stating that these were the main sources of income for states.
“There is total unanimity that these (petroleum and alcohol) should be kept out of GST,” Abdul Rahim Rather, chairman of the empowered committee of state finance ministers, told reporters in Shillong.
Mr. Rather, who is also the finance minister of Jammu and Kashmir, said that the decision to exclude these two items from the proposed GST was based on an appeal made by states.
The central government, in its revised draft of the constitution amendment bill, had proposed that fuel and liquor should be brought under the ambit of GST.
“These are the main sources of income for the states and if they (petroleum and alcohol) are included in the GST the states will stand to lose a lot,” he said.
Among the other core issues tackled on the first day of the two-day meeting here were regarding setting up of an independent mechanism to pay compensation to states that stood to lose with the introduction of the GST, the chairman of the empowered committee said.
He said the provision of Rs. 9,000 crore in the last budget signified that the compensation would be paid to states.
Mr. Rather also said that the committee had decided that there should not be a ‘re-provision’ about declared goods and that the Centre should not have powers to declare certain goods as ‘goods with special importance’.
States were also opposing subsuming of entry taxes levied on goods entering from other states and that the original draft is incorporated in the new draft to offset revenue losses.
Opposing the proposed incorporation of 92 D and 54 A in the proposed bill, Mr. Rather said, “The Committee felt that these are not needed at all because proposed Article 246 A of the Amendment Bill gives powers to Government of India as also to the states to introduce GST.”
The Committee also expressed reservation on restriction of powers of the proposed GST council to recommend any special provisions, like an exemption from tax to a state without the Centre’s consent.
“There was total consensus that since our country is essentially a federation, nothing should be done that will go against the states,” the chairman said.
Among the other issues resolved was the acceptance of the recommendations of the Committee constituted by the Empowered Committee on September 19.