State to spend of Rs 70 cr for GST's IT set-up

In a bid to make the transition to the proposed Goods and Services Tax (GST) smoother for tax payers, the ministry of finance will allot Rs 1,100 crore to state governments for creating IT infrastructure to implement the new tax structure. Karnataka has sent a proposal with a requirement of Rs 70 crore to set up the required infrastructure.

“We want to create a strong IT base in favour of tax payers. We have requested states to send us proposals on their financial needs to create proper IT infrastructure,” said K Jose Cyriac, additional secretary (revenue), ministry of finance on the sidelines of a Bangalore Chamber of Commerce and Industry (BCIC) summit on ‘Goods and Service Tax’ in Bangalore.

Cyriac said that all state governments were onboard the GST and that the ministry was still working on a few parameters to iron out concerns of trade bodies. The proposed Goods and Service Tax was announced by the finance ministry in the 2009 budget. The implementation of GST is expected to bring octroi, central sales tax, entry tax, stamp duty etc into a unified tax system. Pradeep Singh Kharola, commissioner of commercial taxes, government of Karnataka said that although in the long-term the system would correct itself, there was concern that the implementation of GST in the short term could lead to some imbalances.

Trade representatives in Karnataka welcomed the government’s move to simplify the tax structure. However, concerns were expressed like challenges in levying destination-based tax where it was difficult to define place of supply and consumption and compensation to states for CST phase out.

Industry members said that necessary amendments to the constitution should be made well within time so as to avoid litigations on whether the Centre or the state is empowered to levy tax.

They also recommended uniformity in return forms in all states and a time-bound dispute resolution system to be in place before the proposed roll out of Goods and Services Tax in April 2010.