As the nation ushers in the new Goods and Services Tax regime, Kerala can rightfully point to the pivotal role it played to get the GST Council agree on differential rates for State-run and private lotteries, essentials and luxury goods as against the uniform rates proposed earlier.
Despite its preparedness to migrate from the Value Added Tax system to GST, the official machinery as well as traders share the angst of braving transitional challenges at least for the next few months.
Sources privy to the consultations told The Hindu that since 2009, the State had been reiterating its position for maintaining a leeway in tax administration in the Empowered Committee of Finance Ministers that would in turn become the GST Council.
During the crucial decision-making phase before the launch, Finance Minister T.M. Thomas Isaac had vehemently protested against the inordinate delay in finalising the lottery tax rate. This had in turn forced the council to cede to the State’s demand for a 12% levy on State-run lotteries and 28% on others.
Such efforts have yielded rich rewards. Instead of having uniform rates, States have been delegated the powers for making minor changes in SGST rates, and also protect its tax administration rights to a considerable extent. The Centre had initially resisted the demand that tax collection from traders with sales returns less than ₹1.5 crore should come under the purview of the States and the rest should be equally shared by the Centre and State governments.
The Centre had also insisted that the entire service sector should come under its purview and the rest could be shared. Ultimately, it veered round to the decision that 10% of those with sales returns below ₹1.5 crore should come under it and those above, including of service providers, be shared equally. Tax on those in coastal areas vests with the State. The State’s coercive tactics also helped to stymie moves to include stamp duty and oil in GST.
The State government would have to make amends to local governments for doing away with their right to collect entertainment tax. But a clear course has already been laid to make up the loss of income suffered by local bodies. It has also been resolved to direct the Sixth State Finance Commission to submit proposals for improving their income in future.
Being a consumer State, Kerala has every reason to look forward to an increase in tax revenues and achieving desired growth in collections to 20% soon. But whether it would be a path of roses as being projected is what remains to be seen.
