States will not lose out on revenues post GST: Pranab

July 22nd, 2010 - 9:42 pm ICT by IANS  

Pranab Mukherjee New Delhi, July 22 (IANS) Finance Minister Pranab Mukherjee Thursday assured states that they would not lose out on revenue in the aftermath of the implementation of the new goods and services tax (GST) across the country next year.
“Earlier people thought that following the imposition of VAT the states will lose their revenue. But that apprehension has been proved misplaced. Similarly the apprehension that the states will lose revenue in GST regime will also be misplaced,” said Mukherjee at a discussion organised by FICCI.

“Moreover, in the face of actual loss of revenue in the GST regime, there is provision for the centre compensating it,” the minister added.

Mukherjee had Wednesday proposed a three-tier tax structure, which would be applied at the state and the central level in equal measure.

During the first year of introduction of GST, the central government will keep the tax on essential items at 6 percent, for other items the standard rate would be 10 percent, while for services the levy would be 8 percent.

The states too would impose a similar quantum of tax under the three categories, while the structures would be eventually merged, he added.

In the second year of implementation of GST, the standard rate for goods at centre and state level is proposed to be reduced to 9 percent each, while the rate for essential items will be kept at 6 percent. Services will be still taxed at 8 percent.

And during the third year of its existence, the GST rates will be standardised at 8 percent for both goods and services both at the central and state level.

But the minister said that without political consensus across parties and states, the passage of the GST bill would not be possible.

“The GST cannot be imposed by a mere parliamentary legislation and for its implementation the government will have to seek constitutional amendment for it, which requires passage of the bill by two-thirds of the members present and voting in both houses (Lok Sabha and Rajya Sabha),” said Mukherjee.

“The bill will then have to ratified by at least 15 state legislatures.”

The finance minister also sought to allay the apprehension of various state governments that they will be losing their respective authorities to impose taxes.

“If the state finance ministers are going to lose some of their authorities the central finance minister will also lose some of his,” he said.

“As a finance minister of this country, I can decide the excise duty. But after the passage of GST regime, I will also be yielding this authority to the pre-determined legal provisions.”

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