Rs.20,000 cr. revenue was realised last fiscal from these non-VAT goods; State also opposing constitution of GST Council in any form
Tamil Nadu on Monday opposed any move to bring petroleum products and liquor in the ambit of Goods and Services Tax (GST) as this may, it fears, result in considerable erosion in its tax revenue.
Reiterating its stand that these goods should be constitutionally debarred from levy of GST, Minister for Commercial Taxes and Registration B.V.Ramanaa said Rs.20,000 crore revenue was realised last fiscal from these non-VAT (Value-Added Tax) goods. This translates into around 50 per cent of the sales tax revenue.
Speaking at a meeting of the Empowered Committee of State Finance Ministers (Finance/Taxation) in New Delhi, he said these products were also kept out of the purview of VAT. All States, he pointed out, had agreed that these products should not be brought under the GST since that could lead to adverse financial and administrative implications.
Tamil Nadu, Mr.Ramanaa said, was opposed to the constitution of the GST Council in any form and Advisory Committees under the Council to resolve the disputes relating to GST. “These Advisory Committees are another subtle and indirect way of bringing in the already proposed and since deleted GST Dispute Settlement Authority. As the model of Empowered Committee has facilitated the smooth transition to VAT regime, our State considers that the same model will achieve the objective, in the place of GST Council,” he said.
Tax on the sale of goods, he said, was the only source of revenue that the States still have. Their control over the levy and collection of the tax had been a significant factor enabling some of the States, including Tamil Nadu, to raise adequate resources to finance their budgets and plans. “This critical source of revenue is now under threat by the proposed implementation of GST,” he said.
As per the scheme of the revised Bill, the proposed GST Council by majority decision will recommend to the States on taxes, cesses and surcharges levied by the State and the Local Bodies to be subsumed in GST. It would also specify the Goods and Services that are to be exempted; the threshold limit for the levy of GST; the rates including floor rates with bands, etc.
“Such powers to the GST Council were likely to encroach upon the legislative powers of the State enshrined in the Constitution. In the name of harmonised tax structure, the State’s already limited authority to levy taxes should not be snatched away, Mr.Ramanaa said.
Yet another demand that Tamil Nadu raised was empowering of the States to levy sales tax over and above GST on tobacco and tobacco products.
On the GST loss compensation, the Minister said 100 per cent compensation for a minimum period of 5 years should begin from the date of implementation of GST in the State. The discretion that may be given to the States in deciding exempted goods and compounding levy should not be linked to the compensation package. The proposed compensation package should have statutory commitment.
Mr.Ramanaa said the Centre should come forward to settle the CST compensation claims of the States immediately. Though Rs.9000 crore was allocated in this year’s Union Budget for disbursements of CST compensation claims relating to 2010-2011, “we are yet to receive any compensation amount.” Tamil Nadu, he added, had a pending claims of Rs.3861.12 crore up to 2010-2011. A further claim of compensation to the tune of Rs.6908.96 crore for 2011-2012 and 2012-2013 is also pending, altogether taking it to Rs.10,767.08 crore.