'GST possible only after Centre takes states into confidence'

Tamil Nadu worried over infringement of legislative powers, inclusion of non-VAT items

Without the Union government creating the requisite atmosphere of trust and confidence among states, it would be impossible to implement the Goods and Services Tax (GST) regime, said commercial taxes and registration minister B V Ramanaa.

In his address at the empowered committee of state finance ministers in New Delhi today, he said tax on the sale of goods was the only source of revenue that the states still had and their control over levy and collection of the tax has been a significant factor enabling some states, including Tamil Nadu, to raise adequate resources to finance their budgets and plans.

"We apprehend this critical source of revenue is now under threat with the proposed implementation of GST," he said.

The powers given to the GST Council are likely to encroach upon the legislative powers of the state under the Constitution.

Tamil Nadu has already expressed its concerns in this regard and it would oppose any attempt by the Centre directly through the Constitution Amendment and indirectly through the powers vested in the proposed GST Council to take away the legislative authority of the states to decide on the tax rates.

"We are also against the constitution of advisory committees under the GST Council to resolve the disputes relating to GST. These are another subtle and indirect way of bringing in the already proposed and since deleted GST Dispute Settlement Authority," he added.

He said considering that the model of empowered committee had facilitated smooth transition into VAT regime, Tamil Nadu conexpected a similar model would achieve the objective, in place of the proposed GST Council.

The concept of declared goods should be done away with as it is not required under GST. Similarly, in the revised Constitution Amendment Bill, the earlier exception given to petroleum products and alcoholic liquor for human consumption has been taken away and they have been brought under the ambit of GST.

Petroleum products and alcoholic liquor for human consumption were kept outside the purview of VAT under the VAT regime. In Tamil Nadu, we realised about Rs 20,000 crore of revenue from these non-VAT goods during 2012-13. This constitutes around 50 per cent of the sales tax revenue. These goods have very short supply chain before consumption and could collect tax without any leakage.

"We are not in favour of inclusion of petroleum products and alcoholic liquor for human consumption under the GST," said the minister.

Similarly, the minister urged tobacco and tobacco products be included in the states list to enable them to levy sales tax besides GST.

He also reiterated the state's earlier stand that 100 per cent GST loss compensation for a minimum period of five years should begin from the date of implementation of GST in the state.

He also expressed the state's serious concern about non-payment of central sales tax (CST) loss compensation. The Centre should come forward to settle the present CST compensation claims of the states immediately, he added.

While the Union government has allocated Rs 9,000 crore in this year's Budget for disbursements of CST compensation claims relating to 2010-2011, the state is yet to receive any compensation amount. "The pending claims to the tune of Rs 3,861.12 crore for the period up to 2010-2011 is a matter of serious concern for us," he said.