Odisha urges Centre to allow states for taxing tobacco products

The demand was raised by Odisha FM Pradip Kumar Amat at the meeting of the empowered committee of state finance ministers on roll out of GST

The state government has urged the Centre to allow states to levy tax on tobacco and tobacco products.

The demand was raised by Odisha finance minister Pradip Kumar Amat at the meeting of the empowered committee of state finance ministers on roll out of Goods & Service Tax (GST) held in New Delhi on Thursday.

“In the re-revised draft Constitution Amendment Bill, the central government's power to levy tax on tobacco and tobacco products is retained whereas, state governments are not given power to tax on tobacco and tobacco products. Tobacco and tobacco products besides being good sources of revenue for the states are sin goods and their consumption is discouraged. We urge that 'tobacco and tobacco products’ should be included in Entry 54 of the State List so as to enable the states to levy tax on it in addition to GST,” Amat said in his speech at the meeting.

Revisiting the issue of CST (central sales tax) compensation, the minister said, the Government of India has so far sanctioned only Rs 1,303.08 crore (till the end of 2010-11) against the state’s demand of Rs 4,720.21 crore.

For 2011-12, 2012-13 and 2013-14, the loss accrued to the state because of cut in CST rate from four to two per cent has been computed at Rs 869.58 crore, Rs 1,087.67 crore and Rs 877.18 crore respectively.

“Non-release of compensation on account of loss towards CST reduction has caused trust deficit between the Centre and the states. The Centre should release the balance amount of compensation to infuse confidence in the states to move towards implementation of GST,” he added.

Referring to the state's demand for a green cess on minerals, Amat suggested that a new entry be included in List II of State List of the Seventh Schedule to the Constitution as ‘54A- Other Polluting Goods and Services’.

“Due to the application of destination principle in GST, the mineral producing states where the pollution is localised do not get any part of the revenue. It is only the consuming state that gets the tax revenue whereas due to pollution, the citizens of the producing state suffer. Therefore, taking into consideration the adverse environmental impact, the mineral producing states may be empowered to levy an additional non-rebatable cess subject to suitable guidelines in consultation with the proposed GST Council,” he said.

Since a majority of the traders will have transactions under Integrated GST (IGST) besides State GST (SGST) and Central GST (CGST), Odisha has demanded that states should also be authorized to administer IGST along with the Centre.