Roadblocks in GST: some states oppose giving up local taxes

Last Updated: Sunday, September 27, 2009 - 12:06

New Delhi: The Centre`s efforts to introduce the proposed Goods and Services Tax from April 1 next year has hit roadbolocks as some states do not want local levies like purchase tax and octroi merged in the new indirect tax.

The GST is expected to subsume most of the taxes levied by the Centre like central excise and service tax, and those charged by the states such as VAT, purchase tax, octroi and others.

However, a Finance Ministry official said, "Some states like Punjab and Haryana are opposing this as they do not want to remove the purchase tax on agricultural products as they are a major source of income for them while others like Maharashtra do not want to do away with octroi."

Purchase tax is levied by some states on agricultural produce when purchased from the state and taken to some other state, while octroi is levied on various articles brought into a district for consumption.

Moreover, states are worried about their fiscal autonomy as there is an unsaid distrust between the Centre and the states on financial matters.

Madhya Pradesh Finance Minister Raghav Ji has expressed apprehensions that GST would take away the fiscal autonomy of
states by tinkering with state tax rates.

While states have decided that there will be two basic
rates of GST, the Centre is yet to take a call on this issue.

The Empowered Group of state finance ministers will meet
Finance Minister Pranab Mukherjee on October eight to decide
on the goods and services to be included in the new tax
system, only after which tax rates could be decided.

The Empowered Group has set up a joint working group,
comprising state finance secretaries, commissioners of
taxes and Union Finance Ministry officials, to suggest
constitutional amendments and a model GST legislation to pave
the way for introduction of the new indirect tax system.

The group is expected to give a report to the Empowered
Group within three months, Group Chairman Asim Dasgupta had
said earlier.

Dasgupta had also pointed out that the intention as of
now is to keep every state on board to implement GST, unlike
VAT when many states did not join the new state tax from the
beginning.

Bureau Report



First Published: Sunday, September 27, 2009 - 12:06

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