In a setback to the government’s plan of rolling out the Goods and Services Tax (GST) by April 1, 2016, the States demanded on Thursday that the Centre compensate them fully for any loss of revenue during the first five years of transition to the new tax regime.
In the Constitution Amendment Bill for the introduction of the GST, pending before a Select Committee of the Rajya Sabha, the Centre proposes to compensate the States fully for the first three years, followed by three-fourths of the losses in the fourth year and half during the fifth.
“The States are worried about revenue loss,” Kerala Finance Minister K.M. Mani said after a meeting of the Empowered Committee of State Finance Ministers here on Thursday.
Mr. Mani, chairman of the empowered committee, said the States would present five broad concerns before the Select Committee on June 16. They wanted power to levy additional sales tax over and above the GST on tobacco and tobacco products. Some States wanted that the purchase tax be not subsumed in the GST. However, if it were to be merged, then they should be awarded compensation for 15 years. The committee, Mr. Mani said, did not finalise at the meeting the revenue neutral rate of levy for the GST.
The States raised concerns over the proposed provision of an additional 1 per cent tax over and above the GST, which the Centre offered as an assurance against apprehensions of loss of revenue.