BHUBANESWAR: Even as there is unanimity among different stakeholders that the introduction of Goods and Services Tax (GST) will widen the tax net of the Government, the impact of the new tax regime on the resources generation of the State will be clear only after three to four months.
Though preliminary assessment by the State Government suggests that there will be no loss in the resources generation, the agriculture sector will be the worst hit. According to a senior Finance department official, Odisha will lose around Rs 600 crore per annum from paddy, rice, pulses and other related products because of the transition from the VAT to the GST regime.
Paddy and rice had five per cent VAT and the rate of tax on pulses was brought down to one per cent by the State Government after protest by the traders. All these items are in the exempted category under GST.
However, on the whole Odisha is not going to lose revenue as there is provision of compensation to the States if the collection from the GST falls short compared to the revenue generation under the VAT regime.
Official sources said 2015-16 will be the base year to calculate profit or loss under the GST. The State Government will collect VAT on petrol, diesel, aviation turbine fuel and liquor as these items are outside the purview of GST.
If revenue from GST on an average will be less than the collection from VAT, CST, Entry Tax and Entertainment Tax on different items minus revenue from these items, the Centre will compensate with 14 per cent growth rate. The State’s own tax revenue was Rs 22526.96 crore in 2015-16 while the share in Central taxes was Rs 23573.79 crore. These items alone contributed around Rs 5000 crore to the State exchequer including Rs 3000 crore excise revenue.
Sources in the Finance department said the impact on resources generation will have to be studied from August onwards for three months to reach a conclusion. The quantum of revenue collection in July can be known only in August which was under the old system, a senior official said and added that from August onwards the impact of GST will be visible. A clear picture will emerge only in December, he said.
The State will mostly benefit from service tax whose rate has been fixed at 18 per cent. The manner in which services are growing, there is no question for a loss for the State under the GST regime. It is for the first time that States have been empowered to raise service tax. However, revenue from the service tax is yet to be assessed.
Besides, the State Government is also yet to fully receive the CST compensation. Odisha has claimed Rs 2,755.36 crore towards compensation for the loss on account of CST reduction from 2007-08 to 2011-12 but received Rs 2,201.40 crore.