<p>After a tour of Europe to study its value-added tax (VAT) model, Uttarakhand’s principal secretary finance, Alok Kumar Jain, on Tuesday said the state should now accept the goods and service tax (GST).
“The European VAT system is working very well. To my view, European VAT is closer to the proposed GST. I think we should now also accept the new realty of the GST,” Jain told Business Standard. VAT in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services.
The main issue which has not been addressed yet is related to the new tax regime which will take shape in the post-GST scenario where the government officials feel that the state may lose its leverage in terms of financial autonomy.
Under the new GST regime, the Uttarakhand government will lose VAT, a major source of its income during the past few years. Powered by just one per cent increase in VAT on certain items, Uttarakhand in last financial years witnessed a healthy growth of 30 per cent in VAT.
Besides VAT, there is still confusion over the state taxes on essential commodities like petroleum products. The VAT on petrol and diesel is around 25 and 20 per cent respectively, which is a major source of income for the Uttarakhand government of the hill state.
“We are still not very clear what will happen to this tax structure in the post-GST scenario,” said another official. As a gesture of goodwill, the state government recently gave of waiver of Rs 0.78 per litre on the prices of petrol which cost Rs 22 crore to the state exchequer.
Ramesh Pokhriyal Nishank too, while as CM earlier, had made his apprehension evident regarding GST in his several letters to the Centre. He had petitioned that the state should have the right to impose taxes on all units which emit pollution since Uttarakhand is preserving the rich Himalayan eco system.
Jain would shortly meet B C Khanduri who recently succeeded Nishank steer clear air on the GST.