Raising "deep concerns" about the GST implementation, West Bengal Finance Minister Amit Mitra today hit out at the Centre, saying that unpreparedness and hasty implementation have resulted not only in revenue loss but also hit small and medium enterprises (SMEs) hard.
There is a decline of Rs 12,000 crore in one month's (October) collection, he said.
"This is a warning sign that a system created in hurry, which I opposed, is not working today and at the cost of small and medium enterprises. They are crying across the country... We have to correct the system," he said at the annual meet of industry boday Ficci here.
The hasty manner, in which GST was rolled out, had taken a huge toll on the revenue collections, he said.
The revenue collections in October were Rs 83,346 crore, significantly down from the September figure of Rs 95,131 crore.
Mitra expressed apprehensions that there could be further dip in the November figures, saying there is a feeling that this is not going to stabilise in a day or two.
The reduction in the GST collection could have implication on the compensation to states, he said, adding that they need Rs 1.72 lakh crore for the first four months for revenue protection.
About Rs 1.33 lakh crore has been compensated to states in the first four months, and there is a shortfall of Rs 39,111 crore, Mitra said.
The shortfall in revenue due to implementation of the Goods and Services Tax from July this year is protected for five years as per the Act.
Talking about the plight of SMEs, Mitra said there is 40 per cent reduction in their production.
Citing some examples of clusters of Tirupur, Punjab and Maharashtra, he said: "They are hit due to loss in production. The entire MSME sector provides 40 per cent of GDP and 80 per cent of employment is in the bad shape.
"The political economy... First, by demonetisation you killed the informal sector, that everybody knows. Then you have put small and medium enterprises with this pre-mature GST launch."
Mitra cautioned industry bodies to be wary of the provisions of arrest under the GST law and advised them to oppose that.
He also said that frequent changes in tax rates, forms and GSTN have confused taxpayers.
Glitches in the GST Network (GSTN) brought in manual filing which was completely done away with in the Value Added Tax (VAT) regime, he said, adding, "we have gone few steps back from VAT era".
Jammu and Kashmir Finance Minister Haseeb Drabu said these were still early days and it would be unfair to judge the GST system just yet.
"Give it another three to four months. If the government and the GST Council are as responsive as they have been, what we have in the making is a robust GST which works for business, the central government and the states," he said.
The biggest gain of GST is that it represents India's first truly genuine federal legislation. Revenues may not have increased in the last couple of months, but the regime has given states a sub-national freedom to legislate.
The transition, he said, was not as glamorous as globalisation and liberalisation, but it marks a certain move towards formalisation of the economy.
The most import aspect of the legislation was that GST changes the basic ethics of the country and the regime's transparent processes enable us to know exactly what is going where," he said.
The states, he said, have got a wonderful deal as GST guarantees revenues at 14 per cent growth year-on-year and what we have is a virtual tax insurance policy for five years, he said.
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