Even as the proposed Goods and Services Tax (GST) framework is being given the final touches for implementation from April 1, 2017, Uttar Pradesh is projected to be a major beneficiary under the liberal tax structure.
Since elections are due in early 2017, by the time, GST is implemented, a new government would be in power and the new tax regime is then likely to give the much needed financial leverage to fulfill its pre-poll promises.
Already, the various political parties have started to make populist promises. For instance, Samajwadi Party (SP) has promised to provide free smart phone if voted back to power, while Bahujan Samaj Party (BSP) has promised to give cash to the poor.
Since, the consultative process under GST is still underway with the different state governments, the actual gains to the states would depend upon the final tax rates.
Nonetheless, UP is projected to gain handsomely under GST as UP is primarily a consumer state and most goods are imported from other manufacturing states.
Even under Value Added Tax (VAT), which was implemented in UP on January 1, 2008, the state had been a major beneficiary of tax collection although the state was one of the last states to adopt VAT.
A senior commercial tax department official said the Centre would compensate the states for revenue loss under GST, if net collections fall below 14 percent growth compared to last fiscal.
Earlier, cabinet minister Abhishek Mishra, who has been nominated by chief minister Akhilesh Yadav, who also holds finance portfolio, to represent him at the GST meetings in New Delhi, had told Business Standard the state government was sanguine that UP would see its coffers burgeon under GST as was the case with VAT.
He had said there are no irritants and UP was already on board the GST process. Over the past several months, the state government had been doing its homework and analysed the tax environment post GST.
The commercial tax department had been holding meeting with all the stakeholders, including traders and tax experts to take their opinion. Besides, the department has been holding training programmes for tax officials to prepare them for the new GST regime.