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Compensation to states on GST implementation may be
considered
Thirteenth Finance Commission
Chairman Vijay Kelkar said today the Commission is willing to consider giving
compensation to states that stand to lose out on revenues after the
implementation of the proposed Goods and Services Tax (GST) from April 1, 2010. |
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"It is
possible that some states may want assurances that
existing revenues will be protected when they implement
GST," Kelkar said in an address at the FICCI National
Executive Committee Meeting here on "flawless" GST for
promoting growth and employment.
"The Commission is willing to consider providing for
compensation in order to advance the implementation of a
'flawless' GST," the former Finance Secretary said.
The GST would increase employment in the manufacturing
sector, Kelkar told reporters later.
"Today, what is happening... Our tax structure is such
that our manufacturing sector is highly taxed; one of
the highest taxed sectors in the world today is our
manufacturing sector. These taxes will come down," he
said.
Flawless GST reforms would remove the tax-induced bias
against the manufacturing sector and sharply increase
growth in the manufacturing output, exports and blue
collar jobs.
"As you know, even a 2 per cent reduction in the cost
increases profits by over 20 per cent," Kelkar said.
"This will attract investments in the manufacturing
sector".
What is perhaps most attractive is the very favourable
impact of a flawless GST on regions lagging behind.
As "tax cascading" disappears, the industry would move
to these regions because of the likely lower costs and
thus bringing them into the growth dynamics.
Kelkar said a possible step to expand the GST tax base
would be the inclusion of the rail sector. This would be
necessary if a level-playing field is to be provided to
the road and air transportation sectors, which would be
subjected to this tax.
"This inclusion will also ensure that all inter-state
transportation of goods can be tracked through the
proposed IT network", he said.
"The Railways themselves will benefit from this by
availing input tax credit on the significant purchases
made by them," he added.
Source
: Business Standard, India, dated 12/10/2009
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