GST should not impact states` autonomy to levy taxes: BJP CMs

Chief ministers of the BJP-ruled states on Saturday called for caution before implementation of the Goods and Service Tax (GST).

Updated: Jul 24, 2010, 16:00 PM IST

New Delhi: Chief ministers of the BJP-ruled states on Saturday called for caution before implementation of the Goods and Service Tax (GST) with some warning that it would
limit the states` autonomy, even as Congress CMs sought adequate compensation.

"The (GST) rate (proposed by the Centre) should be treated as the floor rate without limiting the autonomy of the state," Karnataka Chief Minister BS Yeddyurappa said while addressing the National Development Council (NDC) meeting.

Chhattisgarh Chief Minister Raman Singh also focused on autonomy saying the new tax regime should not affect adversely the power of states to levy taxes.

"It is my considered view that GST should be implemented only after considering its impact on all stakeholders, especially the small dealers and the common man and ensuring that states` economy and fiscal autonomy are not affected adversely," Singh said.

Gujarat Chief Minister Narendra Modi, while talking to reporters, suggested that government needed to put in place proper IT infrastructure before implementing the GST regime.

"The dream of implementing ambitious plan of GST cannot be implemented unless you create IT infrastructure required for that. I met the Finance Minister earlier and he agreed
with me on this point. This is my personal view on the GST as well as of my party BJP," Modi said.

Yeddyurappa said in his speech: "The uncertainties arising from the impact of GST on the state government`s resources for the Plan financing are a major concern...The
finally selected GST rate should not compromise ability of the states like Karnataka with high tax effort."

As part of the tax reform, the government proposes to introduce GST, which will subsume levies like excise, services tax and VAT, from April 1, 2011.

Finance Minister Pranab Mukherjee, earlier in the week proposed a three-tier tax structure for GST. Proposal included levying of 10 percent tax each by the Centre and the states on general goods, 8 percent each on services and 6 percent each on essential items.

Describing GST as an important step in resource mobilisation, Prime Minister Manmohan Singh in his address to the NDC sought cooperation from the Chief Ministers in implementing the new tax regime. "The implementation of the GST is especially important in this context and I would urge chief ministers to give full support to the effort to implement GST with effect from April 1, 2011."

Participating in the NDC meeting, Haryana Chief Minister Bhupinder Singh Hooda said that states should be compensated for loss of revenue on account of introduction of GST.

"The states should be suitably compensated for loss of revenue on account of GST," Hooda, who is also a senior Congress party leader, said in his speech which was read out
at the meeting.

Punjab Chief Minister Parkash Singh Badal, who is also the leader of Shiromani Akali Dal, opposed subsuming of the purchase tax on paddy, wheat, cotton and other agriculture crops into the GST.

"If purchase tax is subsumed, the state will lose revenue on a continuous basis. Hence, Punjab strongly objects to the subsuming of purchase tax in the proposed GST model," he said.

"Even if the government of India is giving compensation it will be only for a few years and thereafter, the state is going to lose substantial revenue on a permanent basis," Badal
further added.