Finance Minister Yanamala Ramakrishnudu on Saturday said the Central and State governments gave up their exclusive rights under the federal structure to impose taxes on various commodities, to pave the way for the Goods and Services Tax (GST), a structure that helped several countries achieve higher growth rates.
However, the GST would come with a short-term pain that had to be endured in national interest, he asserted, and called upon the stakeholders to understand its objective, which was to have a uniform tax beneficial for the traders and the economy as a whole.
Addressing a seminar on ‘Compliance procedures under GST’ organised by the Federation of Andhra Pradesh and Telangana Chambers of Commerce and Industry (FTAPCCI) here, Mr. Ramakrishnudu said GST had not yet been fixed for 10 commodities. A.P. would make its arguments vehemently but, like all other States, it had to abide by the decisions taken by the GST Council chaired by Union Finance Minister Arun Jaitley.
Compensation
A.P. would continue with the e-way bill system for the time being and close down the check-posts as it could not take the risk of losing revenue heavily by entirely giving up physical frisking on the borders.
He pointed out that States having less than 14% growth rate, with 2015-16 as the base year, would be considered as loss-making, and only then the question of compensating the States arises. Such compensation would be paid out of a Central fund to which the States have to compulsorily contribute by levying a cess as per the norms laid down by the GST Council.
When Value-Added Tax (VAT) was in vogue, the Central government used to compensate the States from the Consolidated Fund of India, but under the GST regime, the States would have to pay for the ‘compensation fund’. Any balance that might remain in it at the end of five years would be distributed among the States as per the 14th Finance Commission criteria.
Estimated loss
Mr. Ramakrishnudu said it was estimated that A.P. would incur a loss of ₹2,900 crore and it had made its views on fixation of GST on some commodities very clear keeping revenue neutrality in mind, i.e. it should not suffer a net loss after being compensated.
FTAPCCI president Ravindra Modi, Indirect Taxes Committee chairman J.S. Karunendra, adviser S. Thirumalai, and Additional Commissioner of Central Customs and Service Tax (Guntur) V. Nagendra Rao spoke.
