When the Finance Minister of India is leaving no stone unturned to create a consensus of GST (Goods and Seervices Tax) roll out in April 2011, the producing states are adamant on their demands to seek a level playing filed with the consuming states.
The state of Haryana, that falls under the category of producer state is likely to lose Rs 4000 cr per annum after the implementation of GST. The finance Minister of Haryana, Ajay Singh Yadav told Business Standard that there should be a permanent mechanism for the compenstaion to Haryana. The assessment of loss to Haryana has been made on the basis of the survey conducted by the Revenue Department Government of India and the Empowered Committee on GST.
According to Yadav, there was no incentive for the producing states in the present form of proposed GST regime as the tax would be imposed only in consuming states. All the states who are producers would tend to lose.
Commenting upon the CST (central sales tax) he said that government of India proposed for the gradual elimination of CST that is 2% at present. This, he said was not viable. It can be redefined to match the changed fiscal measures but removal of CST would make a dent on the state’s revenue.
He told that Haryana wants a dual taxation on the commodities like fertilisers, petroleum products, pesticides. Since the agrarian economy of Haryana was a big consumer of these products so a room for flexibility was required for such products.
Haryana also wants local bodies to be out of the perview of GST.
There has already been a lack of consensus among the states regarding GST council , GST disputes authority and exclusive authority of states on central CST.
Haryana is a Congerss governed state but the state policymakers seek clarity on the distribution of products under the three categories 20% (goods), 12% (essential goods) and 16% (services) before coinciding with the draft constitution bill.
Haryana was the first state to implement VAT (value added Tax) in India in April 2003. According to Yadav, GST was a progressive initiative but the financial implications of this radical step should be taken in view by the GOI.
