GST: Compensation for revenue loss remain an issue with states

NEW DELHI: Most of the states today favoured implementation of GST, but raised concerns with regard to safeguard of fiscal autonomy and compensation for revenue loss due to phasing out of the central sales tax (CST).

"As regards GST (Goods and Services Tax), most of the states have welcomed it today. Only thing that states were looking for was the CST compensation and protection in revenues," Gujarat Finance Minister Saurabh Patel said.

Union Finance Minister Arun Jaitley today met state Finance Ministers as a pre-budget exercise. The meeting lasted for more than three hours.

However, non-BJP state Tamil Nadu expressed "serious apprehensions" with regard to the present GST design.

"A consultative approach is needed to arrive at a just and fair solution to GST imbroglio," Tamil Nadu Finance Minister O Panneerselvam said in his presentation to Jaitley.

"Tamil Nadu is also concerned about the impact of the proposed GST council on the fiscal autonomy of states and the huge permanent revenue loss it is likely to cause to a state like Tamil Nadu, which is a net exporter with large manufacturing industry," he said.

The Centre needs to recognise the need for independent compensation mechanism for revenue losses suffered by states, he said, adding, the central government should permit states to revise CST upwards to 4 per cent in absence of implementation of the GST.

Committing full support for roll-out of GST, Rajasthan Chief Minister Vasundhra Raje said the state government will take all the required steps to see that the GST is implemented in the state with effect from April 1, 2015.

Assam Chief Minister Tarun Gogoi suggested that "introduction of GST may be synchronised with the commencement 15th Finance Commission award period i.e. April 1, 2015."

However, he said that petroleum products should be kept out of its purview.

In order to "allay apprehensions of states about future revenue loss on account of introduction of GST, there should be constitutionally mandate compensation mechanism," Gogoi added.

Finance Minister of another non-BJP ruled state of West Bengal Amit Mitra favoured the roll-out of the comprehensive indirect tax mechanism with certain conditions.

"...but the Centre should compensate for the revenue loss to states on account of phasing out of CST. Centre promised us to give Rs 3,600 crore as compensation, but we are yet to receive it," he said.

In his opening remark, Jaitley said there is need for "rounding off corners" towards implementation of GST.