GST may result in revenue loss of Rs 5,000 cr to state

The implementation of goods and services tax (GST) system from April 1, 2011, is likely to result in a revenue loss of Rs 5,000 crore for the Karnataka government, said V S Acharya, minister of home, Karnataka government.

Addressing a press conference, here on Monday, he said, “We are not against the implementation of new uniform tax system across the country. Unless the revenue loss issue is properly addressed by the Centre, it would be very difficult for the state government to implement it.”

He said the government has asked the Centre for introducing the new tax system with revenue neutral tax rates so that the buoyancy in tax collection is maintained. Presently, the state government has two slabs of 5 per cent and 13.5 per cent under the value added tax (VAT) system of taxation. Under the proposed GST system there will be two slabs of 6 per cent and 8 per cent. This means there would be a revenue loss of Rs 5,000 crore, he said.

During 2009-10, the state mobilised Rs 36,338 crore under various taxes as per the revised estimates. During the present fiscal, the state is aiming at a collection of Rs 39,228 crore, a growth of 8 per cent over the last fiscal.

Acharya said he would be representing the state on behalf of the chief minister at the two-day conference of the empowered committee of state finance ministers starting on Wednesday at Delhi.

“Since the new tax slabs announced under the GST are lower than the existing VAT rates, the state government would ask the Centre to reconsider these rates and introduce revenue neutral rates, so that the state will not lose its existing tax revenues,” Acharya said.