The states demanded on Thursday that the Centre must compensate them fully on any revenue loss during the first five years on transition to the new tax regime, thus putting a big roadblock to the government’s plan of implementing the Goods and Services Tax (GST) by April 1, 2016.
But according to the Constitution amendment Bill for the introduction of the GST that is being vetted by a select committee of the Rajya Sabha, the Centre has proposed to compensate the states fully for the first three years, followed by three-fourths of the losses in the fourth year and half the revenue loss during the fifth year.
“The States are worried about revenue loss,” Kerala finance minister K.M. Mani said after a meeting of the Empowered Committee of State Finance Ministers on Thursday.
Mr Mani, chairman of the empowered committee, said the states would present their concerns before the select committee on June 16. They wanted power to levy additional sales tax over and above the GST on tobacco and tobacco products.
Some states wanted that the purchase tax be not subsumed in the GST. However, if it were to be merged, then they should be awarded compensation for 15 years. The committee, Mr Mani said, did not finalise at the meeting the revenue neutral rate of levy for the GST.