The
Centre is considering a proposal to compensate states for any revenue loss that
they might suffer on implementation of the Goods and Services Tax (GST). The
move is expected to encourage them to adopt the new tax structure scheduled to
be implemented from April 1 next year.
“It
is possible that some states may want assurances
that existing revenues will be protected when they
implement GST. The commission is willing to
consider providing for compensation in order to
advance the implementation of a flawless GST,”
said Thirteenth Finance Commission chairman Vijay
Kelkar while addressing a national conference on
GST.
State finance ministers, at a pre-budget meeting
with finance minister Pranab Mukherjee, had
demanded that the Centre should compensate states
for any loss of revenue following implementation
of the GST.
The enactment of GST means integrating service tax
legislation with central excise law and
harmonising tax rates. While this requires
legislative and constitutional changes, the move
will reduce cascading of taxes and will give
comfort to consumers. A well-designed GST will
also contribute to lowering manufacturing costs
and will make businesses more efficient.
Under the GST structure, the tax would be
collected by the states where the goods or
services are consumed, and hence losses could be
heavy for producer states. The Centre would need
to compensate them for loss of revenue.
Full consensus is yet to emerge on the rates of
GST and the structure but the government has made
it clear that there would be a dual tax structure.
This means there would be two components of tax—
central GST and the state GST.
While the Centre is mulling a five-year
compensation programme, states are of the view
that there should not be any time-frame for the
scheme.
Source :
Economic Times - Gurgaon, Haryana, India, dated
30/06/2009
