Cenvat exemption on commodities must be extended to GST, says Orissa FM

In order to ensure that the prices of commodities of mass consumption do not shoot up in the post GST (Goods and Service Tax) regime, the Orissa government has suggested that the commodities which are presently exempted under Cenvat should be exempted under Central GST.

The state finance minister Prafulla Chandra Ghadai is set to raise this issue at the meeting of the Empowered Committee (EC) of State Finance Ministers to be held in Goa on Friday.

It may be noted that the tax research unit of the commercial department of the state finance department had conducted a study according to which prices of essential commodities like atta, maida, vanaspati ghee, mustard oil , tea, arhar dal and moong dal were to increase by 5-8 per cent after the roll out of the GST.

Ghadai is also set to suggest that the threshold of Central GST for goods may be kept at Rs 1.5 crore and the Government of India should compensate the states fully for at least five years for loss of revenue (if any) following the roll out of GST.

The state finance minister would also raise the demand to provide for an origin based tax of two per cent in the exporting state on inter-state supplies till the IGST (Integral Goods and Service Tax) mechaism is well established.

In addition to this, Ghadai is set to reiterate the state finance ministry's demand of having separate rates for Central GST and State GST.

It has been suggested by the EC to adopt a dual rate of six per cent and 10 per cent for goods and eight per cent for services under State GST as well as Central GST. However, Orissa has voiced its reservations to this move, stating that the proposed State GST rates are lower than the state's RNR (Revenue Neutral Rate) and the state is likely to incur loss.

Raising concerns that the tax base of the state would be eroded substantially with the abolition of Central Sales Tax (CST), the state finance minister has demanded that the tax rates as decided by the GST Council may be treated as floor rates and flexibility may be given to states to increase rates within a band of two per cent.