 "States write to Finance Commission on revenue impact of GST")
Many central and state taxes such as excise duty, service tax, value-added tax, sales tax and luxury tax will be subsumed under a GST. “The states will present to the FC a detailed note on the losses they might incur due to subsuming of these taxes and the potential gains due to them by getting the right to levy service tax,” said EC Chairman Abdul Rahim Rather, after a meeting of the group on Monday.
The move comes after the Finance Commission wrote to the Union finance ministry, seeking details on the impact of GST on state revenues. The ministry sent on the letter to the EC.
The Finance Commission, headed by former Reserve Bank of India governor Y V Reddy, will make recommendations regarding sharing of Union taxes, principles governing grants-in-aid to states and transfer of resources to local bodies. The report, covering a period of five years starting from April 1, 2015, will be given to the government by October 31.
The states are already miffed with the Centre for not clearing their dues on account of a reduction in Central Sales Tax (CST) and want a foolproof mechanism under GST for compensation. The concern was raised again in the meeting on Monday but as the election code of conduct is in place, a decision will be taken by the new government at the Centre after the elections.
Finance Minister P Chidambaram had provisioned for Rs 9,300 crore towards CST compensation in the 2013-14 Budget, but only Rs 1,940 crore was finally released and barely a few states got the funds. In the Budget Estimates for 2014-15, he did not provide any funds for this but as it is an interim Budget, the next government can review and change this in the full Budget.
The meeting also discussed the information technology infrastructure for GST in the backdrop of the Bharatiya Janata Party's prime ministerial candidate, Narendra Modi, questioning the Centre's preparedness in this direction. States agreed to transfer the management of their Tax Information Exchange System to GST Network, a common IT platform for payment of all kinds of indirect taxes.
Other issues discussed included registration and returns of assesses, uniform business processes for GST across the states, nomination of five representatives on the IT advisory committee on GST, and review of the latest revenue position of states. The EC set up a sub-committee to look into the issue of differences among states with regard to the registration and return process to be followed in GST.