'GST is interference in state's fiscal autonomy'

The implementation of Goods and Service Tax (GST) regime in its present form will infringe upon the taxation powers of the state and will intervene in state’s financial autonomy, a top finance department official of Karnataka said.

“Taxation powers pertaining to about 53 per cent of the revenues raised by the states are sought to be taken away by the proposed amendments. The fiscal structure is sought to be permanently altered,” he added.

GST is proposed to implement a single tax structure all through the country. Its implementation needs amendment of the Constitution along with it’s ratification by the state governments.

Earlier, B S Yeddyurappa, chief minister of Karnataka, had expressed his concern regarding GST, stating that Karnataka was likely to lose Rs 5,900 crore as a result of the shift to a GST regime.

He also said that the proposal would have a major, adverse impact on the state’s autonomy. “States are being asked to accept a GST rate that is much lower than the revenue-neutral rate which will constrain in the fiscal space available to the states,” Yeddyruppa noted.

The states’ ability to fund development expenditure would be curtailed resulting in a greater dependence on the Centre for such funds, he added. He also asked for more discussions on all the contentious issues with greater clarity.

The Karnataka government is also opposed to the haste shown in implementing GST. “Draft amendments were opposed by several states at the last meeting of the Empowered Committee on August 4. Within a week, another draft has been circulated for consideration,” he said.

The state government is also against the move to subsume octroi levies within the GST regime. “The amendment suggestion that octroi be levied and collected by local bodies is ‘impractical and regressive”, Yeddyruppa said.

He also suggested that the proposed GST council, which would implement the regime, should only recommend floor rates giving the states the autonomy to fix their own rates above the suggested levels. The tax rates that are within the purview of local bodies should not be in the GST regime, he added.