AP, Telangana wary of GST impact, want compensation for revenue losses

Hyderabad: The two Telugu states are wary of the impact on their revenues on account of the Centre’s plans to implement the Goods and Service Tax (GST), from the next financial year (2017-18).

Union finance minister Arun Jaitley on Wednesday said that the Centre would go ahead with the implementation of GST since all states, barring Tamil Nadu, have reached consensus on the issue.

Though both TS and AP have agreed to be part of the GST regime, they wanted a Constitutional guarantee and a clear-cut roadmap on the mode of payment towards compensation for the revenue loss they will incur on account of GST.

The apprehension of the two states has a basis: When Central Sales Tax (CST) was introduced in 2002, the Centre had promised to compensate states for the revenue loss they would incur on account of the new tax regime. However, successive governments at the Centre failed to keep the promise. The Centre still owes over Rs 600 crore in CST arrears to TS. The two Telugu states want the Centre to clear the CST arrears first before implementing GST.

TS Finance minister Etela Rajender said, “The Centre should first take measures to build confidence among the states that it would take care of the states in case they incur revenue losses on account of GST. There are apprehensions among all the states on this issue. This is because, when CST was introduced earlier, the Centre had promised to compensate states for revenue loss. But that was not done. When Telangana state was formed, the Centre owed over '4,000 crore CST arrears. After repeated reminders, the Centre released the arrears but it still owes over Rs 600 crore.”

Finance ministers of all the states met in Kolkata on Wednesday to discuss the implications of GST. AP government also expressed similar views in the meeting, which projected fears that it would lose revenue of nearly '1,000 crore per month, if GST is implemented.