UP demands Centre to settle tax losses

The Uttar Pradesh government has demanded urgent settlement by the Centre of its Rs 2,527-crore claim for sales tax losses it had incurred in the last three years.

The claims pertaining to the 2007-08, 2008-09 and 2009-10 financial years, were reiterated by commercial tax minister Nakul Dubey at the recent Goods and Services Tax (GST) empowered committee meeting of state finance ministers in Goa.

He also emphasised that the Centre should fix a date for the settlement of claims arising out of Value Added Tax (VAT) and central sales tax losses by the respective states. The Centre should thereafter ensure urgent reimbursement, he noted.

UP had implemented VAT in January 2008. Earlier, UP Commercial Tax Commissioner Chandra Bhanu had told Business Standard the Centre had requisitioned the Auditor General’s report regarding the compensation demand, which had been complied.

The Centre had asked the states to deduct the amount of additional revenue on account of VAT increase from four to five per cent from their claims. “The hike in VAT was an attempt by the states to increase their revenue and the Centre should not take it into account,” Dubey said.

He said the states should be given the power to fix GST rates or to exempt goods in the spirit of the autonomy of the states. The Centre had proposed to exempt 99 items from GST. The state supports keeping petroleum products out of GST.

Holding on to UP’s earlier position, Dubey maintained the state was not against GST per se. However, UP wanted to ensure that the proposed tax system would target inflation, was not anti-poor or anti-trader and at the same, increased the tax net.

However, he said UP would oppose a tax regime, which increased the tax burden on small industry and accrued benefit to large industry, capitalists and multi national companies.

UP has suggested the threshold limit for traders/manufacturers in central GST be fixed at Rs 3 crore against the proposal of Rs 10 lakh.

The government opined if the threshold was kept at Rs 10 lakh, small enterprises would come under the tax purview which hitherto did not attract central excise duty.

UP maintained if GST was implemented without creating a proper structure, it could hurt the economy adversely and create problems for the states.