A Rajya Sabha committee on Tuesday demanded greater clarity from the government on the one per cent additional tax, proposed over the Goods and Services Tax (GST) in the Constitution amendment Bill to benefit manufacturing states.
Revenue department officials have assured the Rajya Sabha’s select committee members that the empowered committee of state finance ministers was seized of the matter and would be submitting its report in a month.
An additional one per cent tax is proposed in the Bill to help manufacturing states. As GST is a destination-based tax system, manufacturing states such as Gujarat and Tamil Nadu have reservations over it. However, this tax to help GST might have a cascading effect since there is no provision of input credit. Recently, Chief Economic Advisor Arvind Subramanian criticised the provision, suggesting the government reconsider it.
Meanwhile, Chairman of the empowered committee K M Mani submitted views of the states to the select committee, asking for full compensation to states for any loss due to proposed GST for first five years. The Constitution amendment Bill too provided for compensation, but with tapering from fourth year onwards. The Centre would give full compensation for the first three years, 75 per cent in the fourth year and 100 per cent in the fifth year, according to the Bill.
The states within empowered committee are also divided over one per cent tax, meant for manufacturing states. The consuming states are opposed to the tax and its cascading effect.
The 21-member select committee also heard out representatives from industry association such as Nasscom and COAI.
While, in principle, they were in support of the GST, several of their representatives raised the issue of the one per cent additional tax which is of major concern to non-manufacturing states, sources said.
The committee members will next tour metropolitan cities of Kolkata, Chennai to get the views of the most important stakeholders of the GST-states on board. States are crucial for even enacting the Constitution amendment Bill as half of the 29 states have to approve the Bill, if passed by Parliament.
Source : Business Standard.