States not consulted over proposed amendments to GST Bill: Amit Mitra

KOLKATA: West Bengal finance minister Amit Mitra has shot off a letter to the Chairman of the Empowered Committee of state finance ministers A R Rather demanding an urgent discussion on the Constitution Amendment Bill on Goods and Services Tax (GST) and said most of the states were not consulted on the proposed changes.
The Union Cabinet on Wednesday approved the Constitution Amendment Bill on GST and it is expected to be introduced in Parliament in the current session.Mitra said West Bengal stands to lose Rs 4,000 crore on account of central sales tax (CST) only, if the draft Constitutional Amendment Bill on Goods and Services Tax (GST) is approved in Parliament in its present form without compensating the state on its pending CST share.
GST is proposed as a destination based tax with tax revenues going to the consuming states. The states that consume more will be getting more tax, while producing states that export goods to other states will be apparently on the losing side. Producing states such as Bengal, Maharashtra have to tread with caution.
Mitra took exception to the Centre’s bid to push through the Bill without consulting the majority states when the Bill in its present form infringes upon the state’s autonomy to tax certain items at its own rates and also keep certain items namely crude petroleum, diesel, aviation turbine fuel and natural gas outside the GST net. The Centre has indicated it has taken on board the views of states and Finance Minister Arun Jaitley has offered several concession to roll out the most ambitious indirect tax reform.
The state FM said the draft Bill includes petrol and petroleum products under the GST net when the Mamata Banerjee government had strongly objected against inclusion of these items in the last meeting of the empowered committee meeting held on December 11. With most of the goods and services coming under the GST, the Bill also proposes to do away with the state’s power to levy tax on select items — “declared goods” as provided under Article 286 of the Constitution.
Mitra had urged to retain the state’s higher tax rate on tobacco and tobacco products. Accordingly, a meeting of the empowered committee of the finance ministers was called on December 11 to discuss the amendments to the draft Bill submitted by the states. Later, Union finance minister Arun Jaitley was present in the meeting of the panel. As many as 29 states supported Bengal’s cause and the majority opposed the draft Bill in its present form, Mitra said.
Jaitley told the committee to form a sub group for further discussion and a panel was formed with Gujarat, Punjab, Tamil Nadu and Karnataka. It did not have any representation from eastern states, Mitra said.
The sub-group discussed the Bill without circulating it to the state finance ministers and the draft Bill got the Cabinet's nod. “I have written a letter to Arun Jaitley on December 15 pointing to this fact. He asked me to meet him. But the chairman of the empowered committee A R Rather, the finance minister of J&K, later told me that it will be discussed in the committee before submission to the cabinet. However, to our surprise we heard that it is tabled in the cabinet undermining the Empowered Committee and the federal structure,” he added.
Elaborating the tax implications, Mitra pointed out that if the petrol and petroleum products is subsumed in GST then the state may loose up to Rs 2,350 crore. Petroleum products and tobacco are major sources of revenue earner for the debt ridden state. Mitra said the aggregate revenue loss would be Rs 8,200 crore in the first year. The amount is almost 20% of the states own revenue generation of Rs 40,000 crore and 29% of the debt repayment of Rs 28,000 crore. The capital repayment out of this is Rs 9,000 crore which would be almost equal to the revenue loss.
This apart, sales tax on diesel in Bengal is 17% while that is on motor spirit (petrol) is 25%. There is a cess of Rs 1 as well on both diesel and motor spirit along with some other surcharges. The total revenue from of the state from this account is Rs 3,000 crore. Besides, petrol and tobacco, the new draft of GST also proposes to subsume entry tax and CST is out of the divisible pool.
According to Mitra, in entry tax account the state would loose between Rs 1,200 crore and Rs 1,500 crore while in tobacco the loss would be Rs 350 crore. “The major blow will be CST. Now the total due of the state on this account is Rs 78,000 crore and our due is Rs 4,500 crore from 2010. The centre is now offering only Rs 11,000 crore from this account to the states where we shall get only Rs 400 crore. The perpetual loss every year from this account would be Rs 2,600 crore which will be applicable from the second year of GST roll out,” the minister said.
Potential Revenue Loss For Bengal From GST
* First yr: Rs 6,200cr-8,200 cr
* From petro/petro products: Rs 350cr Rs-2,350 cr
* From tobacco: Rs 350 crore
* Loss on CST in 1st yr: Rs 4,000 crore
* Loss on CST after 1st y: Rs 2,600 crore
* Loss on compensatory entry tax --- Rs 1,200 cr-Rs1,500 crore