The Empowered Committee of State Finance Ministers has agreed to the demands of the Orissa government to keep coal royalty and entry tax out of the purview of the proposed Goods and Service Tax (GST).
The committee had earlier proposed to subsume coal royalty and entry tax under GST which was opposed by Orissa.
“The empowered committee of state finance ministers has finally agreed to our demand for keeping coal royalty and entry tax out of the purview of GST and this is a welcome move", said Prafulla Chandra Ghadai, the state finance minister.
The meeting of the empowered committee of state finance ministers had met on October 29 at Goa.
Earlier, the state government had categorically stated that it would not roll out the GST if the entry tax is not kept out of the purview of GST.
Every year, the state government earns around Rs 800 crore by way of entry tax and Ghadai had pointed out that this tax should not be brought under the fold of GST.
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Since natural gas which was included in the VAT (Value Added Tax) list, has been kept out of GST on the ground that it is used for generation of power, Orissa had argued that coal also must be kept out of GST. The state had pointed out that GST on coal would have a direct effect on power cost.
Currently four per cent VAT is levied on coal. If it is included in the GST list, the effective rate would be 12 per cent as both state GST and central GST would levy 6 per cent each on coal.
However, no decision has been taken as of now on the mechanism of settlement of disputes pertaining to GST.
"It has been suggested that a Dispute Settlement Authority chaired by a retired judge of the Supreme Court of India needs to be created for settlement of disputes but we feel that this can be resolved by the GST Council itself. However, no decision has been taken on this issue so far," Ghadai told reporters on the sidelines of the two-day national conference of the Institute of Chartered Accountants on 'New Paradigms of Competitiveness'.
Orissa had suggested that the assessment and payment of compensation for loss to the states due to the roll out of GST can be done by an independent committee consisting of members drawn from the GST council and chaired by the Union minister of state for finance.
At the last meeting of the empowered committee of state finance ministers, the the Orissa government has suggested that the commodities which are presently exempted under Cenvat should be exempted under Central GST.
It may be noted that the tax research unit of the commercial department of the state finance department had conducted a study according to which prices of essential commodities like atta, maida, vanaspati ghee, mustard oil, tea, arhar dal and moong dal were to increase by 5-8 per cent after the roll out of the GST.