Orissa supports purchase tax on food grains

The Orissa government will seek continuance of the purchase tax on foodgrains under the proposed Goods and Service Tax (GST) regime to be introduced across the country, said state finance minister Prafulla Chandra Ghadai.

Talking to the newsmen here today, Ghadai said, the Centre is contemplating to allow states like Punjab and Haryana to continue with purchase tax on foodgrains. Orissa would demand the same treatment, he added.

At present, Orissa is collecting purchase tax on foodgrains at the rate of 4 per cent under the Orissa Sales Tax regime and last year got Rs 221 crore from this source.

Ghadai, who left for New Delhi today to attend the meeting of the Empowered Committee of State Finance Ministers on 7-8th January, said, the meeting would deliberate on the proposed structure and roadmap of GST. He said, if the purchase tax on foodgrains is put in the exemption list, the state will be subjected to a loss of about Rs 250 crore annually. Similarly, Orissa will favour continuance of 2 percent Central Sales Tax (CST) in the initial stages of the introduction of GST as the state is yet to assess the revenue loss on account of the introduction of the new tax regime. The government is targeting to collect Rs 646.9 crore from CST at the present rate in the current fiscal. Stating that a presentation will be made before the Empowered Committee on the revenue neutral rate (RNR) for the state under the GST, Ghadai said, the state will demand the implementation of the new system from April, 2011 instead of April, 2010.

On the issues of Central devolution to the state following the submission of the report by the Thirteenth Finance Commission (TFC), the finance minister said, the government hopes the dispensation will be better this time.“ We have left no stone unturned and expect the better devolution from the TFC”, he said.

The share of Central taxes marginally increased to 30.5 percent during the 12th Finance Commission from 29.5 percent in the 11th Finance Commission recommendation. Since this is not adequate to meet the growing needs of the state’s economy, Orissa has demanded the state share to increase to 50 percent.

However, he was non-committal on whether the overall devolution would increase beyond 5.16 percent. It may be noted, the state government has sought Rs 2,20,524.61crore from the TFC including Rs1,32,141 crore as non-plan revenue deficit grant.

According to the experts, the devolution to the state may decline in percentage terms even with an increase in state’s share from Central taxes. It will depend on the perception of the TFC towards the needs of the state which had attained revenue surplus in the years preceding 2009-10.