Odisha wants traders, small manufacturers out of GST purview

State accumulated loss of around Rs 1,500 cr after CST rate cut

Odisha has taken exception to inclusion of traders and small manufacturers with an annual turnover of Rs 1.5 crore under the proposed Goods & Service Tax (GST).

The state government has argued that the move may cause harassment to a large number of traders and small manufacturers and increase litigation.

"GST should be so designed that it is simple, easy to administer and free from hassles and harassment for the taxpayers. Presently, manufacturers below turnover of Rs 1.5 crore and traders are not subjected to Central excise.

In the proposed GST, all the traders and small manufacturers would come under the purview of both Central and state GST and be subjected to dual authority. The empowered committee may deliberate on this issue and suggest for avoiding dual control”, state finance minister Prasanna Acharya said in a note submitted to the empowered committee of state finance ministers on GST.

Making a plea for mineral bearing states which have to suffer pollution load because of mining activity, the Odisha government has suggested widening of the present GST, by levying a production-based non-rebatable cess on notified polluting goods. The state government feels introduction of the cess can help mitigate concerns of pollution and also facilitate overcoming some of the present barriers and concerns in implementing GST.

Under GST, the destination principle applies and the producing state where pollution may be localised does not get any part of tax revenue. It is only the consuming state that gets the tax revenue whereas the pollution is  suffered by the citizens of the producing state, the minister said to substantiate his plea for the cess.

Raking up the issue of CST (Central sales tax) compensation, the minister said, “As the loss is of a permanent nature and the rationale for decrease in CST is linked to GST, the state is of the view that if GST is not implemented from 2013 onwards, then CST should be increased to 4% so that the issue of payment of compensation will not arise in the future.”

After the Centre gave its consent to compensate revenue loss suffered by states due to pruning of CST rate from 4% to two%, Odisha is expecting a compensation of Rs 1,000 crore. The state had an accumulated loss of around Rs 1,500 crore after the CST rate cut.