Bihar demands compensation for revenue loss on GST  

The deputy chief minister, Sushil Kumar Modi, has sought adequate compensation for the revenue losses the state would suffer after the implementation of Goods and Services Tax from April next year.

Modi, who also holds the finance portfolio, said on Sunday that the past experience with the Centre has been very bad in seeking compensation for revenue losses by implementing taxez introduced by the Union government, such as the Central Sales Tax.

He said that though the state government has not calculated the losses it would have negative impact on several counts such as the state’s share in entry tax. He explained that the state would lose around Rs 600 crore on entry tax as the tax would be merged with the GST.

The state would lose Rs 250 crore as Service Tax from the Centre. The state government is also seriously considering to increase the rate of the Value Added Tax (VAT), though the quantum of increase has not yet been finalized. At present the state government charges four per cent as VAT.

The increase in VAT has been necessitated by shortage of financial resources following the implementation of the Sixth Pay Commission recommendations and decline in the state’s share in Central Taxes by nearly Rs 2,000 crore. As per a government estimate the hike in VAT rate would help fetch more than Rs 150 crore in the rest five months of the current financial year if it were implemented in November.

Source : Bihar Times, India, dated 19/10/2009