The Madhya Pradesh government is
gearing up to take on Centre over the goods and service tax (GST) issue. If
things do not happen its way, the state is likely to challenge the Centre on the
issue in the Supreme Court. According to a senior official, the new system would
strip the state of its Constitutional right to levy tax. “The GST, if
introduced, is against the federal structure and Constitution. The Centre cannot
snatch the powers vested in the state to levy tax, the state will have to
challenge it in court,” the official said.
The state
has its logic ready. The GST is being levied on the
basis of data that service tax collection has gone up
but an analysis readied by the state finance department
indicates otherwise.
“If you go by the National Accounts Statistics (NAS)
compiled by the Central Statistical Organisation (CSO)
and analyse manufacturing and consumption data, the
expectation of revenue gain from services is not based
on facts. Cost of services consumed in the manufacturing
activities is included in the value of the manufactured
goods. It is already being taxed both under Cenvat and
VAT. Only the consumption of services by the household
provides additional tax base in GST over and above the
tax base from goods in VAT,” said the official.
The state has also come up with some facts that no
additional tax base would be available in GST from
private final consumption expenditure under the head
‘Hotel and Restaurants’ over and above the tax base of
VAT.
The tax base of GST should be in range of Rs 1300,000
crore to Rs 1600,000 crore. The corresponding RNR
(revenue neutral rates) will be in range of 20 per cent
to 25 per cent. The collection efficiency will be in the
range of 30 per cent to 37 per cent.
The state has also pointed out: “For the national GST
administered by the federal agency, collection
efficiency will be around 35 per cent, but for
subnational GST administered by multiple state agencies,
collection efficiency will be around 25 per cent-30 per
cent only. “In this case there is no logic of imposing
GST in states; it will lead to revenue losses and make
the states financially dependent on the Centre,” said
the official.
Source
: Business Standard, India, dated 20/10/2009
