Goods and Services Tax consensus must: Tamil Nadu CM Jayalalithaa

In a letter to the union minister of finance, corporate affairs and defence Mr. Arun Jaitley, copies of which were sent to Chief Ministers of all states, Jayalalithaa stated that key issues relating to GST such as compensation period and methodology, revenue neutral rates, floor rates with bands and commodities to be excluded from GST needed a wider consensus so that genuine apprehensions of states over loss of fiscal autonomy and permanent revenue loss are allayed.

Pointing to a revised draft Constitution Amendment Bill circulated on June 20, 2014, Jaya said: “It has been brought to my notice that during the recent meeting of the Empowered Committee of State Finance Ministers held on August 20, 2014, consensus was reached amongst states on some more issues including the threshold limit for levy of GST on goods and services should be fixed at Rs 10 lakh; the threshold limit for compounding scheme should be fixed at Rs 50 lakh with a floor rate of tax at 1 per cent; and that the Exemption List under GST should be common for both CGST and SGST. I do hope that the Government of India would accede to all these points.”

Besides, she also suggested that states should be allowed to grant exemption on all goods of local importance without any restrictions. Pointing out that the proposal to bring petroleum products under the ambit of GST was an area of concern, Jaya said that the proposed system of dual levy wherein states will also be empowered to continue the existing levy of tax on sale of petroleum products in addition to GST was not acceptable.

“I strongly urge that petroleum and petroleum products should be kept completely outside the ambit of GST,” the Chief Minister said.

She also pointed out that manufacturing states like TN stand to permanently lose substantial revenue if GST is implemented due to a sudden shift in levy from the point of origin to the point of destination. “In addition to the revenue loss arising out of phasing out of CST and transfer of Input Tax Credit on inter –state sales and inter-state stock transfers, the state also stands to lose substantial revenue arising out of subsumation of other taxes such as entertainment tax, luxury tax, entry tax on vehicles and betting tax,” Jaya stated in her letter sent on Wednesday.