: Kerala has demanded exclusion of petrol and diesel from the purview of the proposed Goods and Services Tax regime to be introduced soon by the Union government, besides adopting the destination-based principle that would ensure that the tax under GST will accrue to the State where the ultimate consumer is located.

The State’s views on the GST regime were presented at the Finance Ministers’ Conference, convened by Union Finance Minister P Chidambaram in Delhi recently. Kerala strongly opposed any suggestion or discussion for the dilution of destination principle in the GST and wanted the Centre to formulate the place of supply rules accordingly and mention it explicitly in the proposed draft Constitutional Bill.

Kerala’s tax revenue from petroleum and diesel was over Rs.4,000 crore. If these commodities are included in the GST, there would be considerable shortfall in the revenue that would accrue to the State, it felt. The GST would be a new system of indirect tax administration requiring different sets of skills. The established concept of sale and goods would undergo drastic changes. Major unlearning process would be needed to induct new concepts. Hitherto, the State was administering tax on the sale of goods only. With GST, services will come to the fore. New Anti-evasion investigative techniques would be necessary. For effective implementation of the new business process, a complete revamp of the existing organisational structure may be necessary for a uniform machinery across the States and functional convergence with the Central Government machinery need to be adopted, according to the stand taken by Kerala at the meeting, in the absence of Finance Minister K M Mani, who could not attend it owing to the ongoing Assembly session.

Kerala has also expressed its concern about dual control of tax authorities on small traders in the GST regime. Mr. Mani pointed out that small traders in Kerala had voiced their objections about this and the government considered their reservations as genuine. Kerala is of the opinion that the administration of both CGST and SGST with respect to these dealers should be entrusted to the States up to a certain turnover limit. The representatives of small traders should also be consulted while formulating the policy perspectives, he said.

The State also wanted the Centre to address the concerns about CST compensation urgently because it had the potential to decelerate the GST process, besides holding credible and feasible discussions on the compensation formula.

  • State seeks destination-based principle

  • Concern over dual control of tax authorities