Double the compensation for GST- Claim States
States are demanding that Central government double
the compensation proposed by the Finance Commission
to implement the already delayed Goods and Services
Tax as the “Grand Bargain’’ is leading to stiffer demands.
The Empowered Committee of State Finance Ministers is set to demand a compensation of Rs 1-lakh crore to adopt the GST, which is seen as the biggest ever tax reform in the nation which may also lead to a fall in revenues for some states.
The committee will take up the issue with the Finance Minister Mr Pranab Mukherjee in early April, one of the members of the committee said.
The government has been negotiating with the states to implement the GST as it attempts to do away with the anomalies prevailing in the current structure where goods and various services are taxed more than once by state and central government agencies. To avoid the “tax-on-tax’’, states are seeking more funds from the central government as the implementation may lead to lower tax revenues for them. The tax which was supposed to take effect April, 2010, is delayed by a year due to disagreements.
The central government had accepted the 13th Finance Commission recommendations on revenue sharing with states, which the states said “ignored’’ their demands. It suggested paying of Rs 50,000 crores to states to agree for GST. The implementation of the tax requires co-operation from states as it involves amending laws.
The Committee will also ask the finance minister to change the amortisation schedule of the compensation, the person said. The April-meeting will also be the first one with Mr Mukherjee after the commission report.
“Some states have raised fresh demands for a higher compensation. Accordingly, we are planning to make a case for that,” Asim Dasgupta, the chairman of the Empowered Committee of the State Finance Ministers told recently. The Committee had earlier sought Rs 80,000 crores.
He had said the Commission’s suggestion to peg compensation at Rs 50,000 crore “was largely insufficient”.
Mr Dasgupta, who is also West Bengal’s finance minister, believes that bulk of the compensation should be available to the state governments in the first two years of the proposed GST regime instead of equated annual payment over five years.
“We are requesting disbursement of a significant chunk of the compensation in the first couple of years since that is the time when the impact is felt the most,’’ he had said.
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