Changing their earlier stand, States now want to keep petroleum products and liquor within the ambit of the Goods and Service Tax (GST).
According to sources, the Empowered Committee of States' Finance Ministers presented its changed stand before the Standing Committee of Finance on Friday. The Standing Committee is discussing the Constitutional Amendment Bill for the GST.
The Empowered Committee's views were presented by its Chairman and Deputy Chief Minister of Bihar, Mr Sushil Kumar Modi. Sources said, “Mr Modi proposed that States should be allowed to impose additional non-creditable levies over and above GST on petrol, diesel and liquor after these products are brought within GST.”
The States have argued that bringing the products will allow corporates to take input tax credit. This will help the industry but the States may lose revenue on account of taking products within GST. The States had asked for additional taxation without input tax credit to compensate the shortfall in the revenue. On an average, petroleum products and liquor contribute 40 per cent of the total revenue of the States.
Sources added that Mr Modi also called upon the Centre to seek broader consensus with States on making any goods a ‘Declared Good'. Article 286 of the Constitution provides that the Centre can make goods of national importance ‘Declared Goods'. Then all States can levy a uniform 5 per cent excise duty. The States alleged that the Centre did not take them into confidence before declaring LPG as a ‘Declared Good'.
Pranab's expected elevation may delay GST
With the Finance Minister, Mr Pranab Mukherjee, all set to become the President, implementation of the Goods and Services Tax (GST) may get delayed. The Finance Ministry intends to implement the GST from April 1, 2013.
However, according to a highly placed source, “Now when the Standing Committee on Finance is moving fast, the political uncertainty emerging after the Finance Minister's elevation and changes in Finance Ministry may impact the implementation of GST.”
The Standing Committee on Finance is meeting on a weekly basis to ready its report on the Constitutional Amendment Bill before the Monsoon Session of Parliament.
Once the report is in place, the Cabinet will discuss it before it is brought before Parliament for consideration and passage. After Parliament approval, at least 15 State Assemblies will be required to endorse it. “This whole process can take more than a year to complete,” the source said.