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Jaya Push for Fiscal Federalism on Tax

Urges Modi to delegate rights to states collect all levies while Centre could focus on inter-state taxation; points out lacunae in GST Bill

Published: 19th August 2014 06:00 AM  |   Last Updated: 19th August 2014 03:19 AM   |  A+A-

CHENNAI: Stating that there are many more issues left to be addressed over the Goods and Services Act Amendment Bill (GST), Chief Minister J Jayalalithaa on Monday renewed her suggestion that the Central government could completely delegate the levy, collection and appropriation of the substitutes for VAT, Central Excise Duty and Service Tax within a State to the State machinery, while the Centre could focus on inter-State taxation.

“The apprehension amongst many of the VAT assessees that they would be subjected to two sets of taxation could be overcome if this simpler structure is put in place.  It will also ensure that the original Constitutional design of fiscal federalism of leaving the States in complete control of at least one sizeable source of revenue is preserved,” the Chief Minister said in her letter to Prime Minister Narendra Modi on Sunday. “I believe it is still not too late to move forward on GST by putting in place the elegant solution I have suggested,” she added.

Jaya.jpgHowever, the Chief Minister reiterated the importance of arriving at a broad consensus on key and contentious issues like dual rate bands, taxation threshold, IGST Model, commodities to be excluded from GST, clarity on dual administrative control, compensation period and methodology, before the enactment of the Constitutional Amendment Bill on GST is taken up.

While expressing satisfaction that some of the concerns expressed by her had been addressed in the revised draft Constitutional Amendment Bill on GST circulated to the States on June 20, Jayalalithaa said the provisions relating to Declared Goods had been removed and alcoholic liquor for human consumption kept outside GST. The provisions relating to advisory Committees for dispute resolution had also been deleted.

“However, a number of concerns still remain.  Foremost amongst these is the issue of fiscal autonomy. The proposed GST Council with the functions assigned to it will override the supremacy of the Legislature, both at the Centre and in the States in taxation matters. This is unacceptable to Tamil Nadu,” the Chief Minister said.

Jayalalithaa further said the Amendment Bill failed to include enabling provisions for States to levy higher taxes on tobacco and tobacco products, similar to what had been permitted for the Centre.

“Tobacco consumption is a public health hazard and many States including Tamil Nadu are levying higher taxes on tobacco, which should continue to be permitted,” she added.

Stating that petrol and diesel which are currently outside the purview of State VAT in most States, are still proposed to be covered by GST under the draft Bill, the Chief Minister said a new provision had been made in the revised draft amendment Bill which enables States to levy additional taxes over and above the GST on the sale of petroleum products.

However, this system of a dual levy of GST and an additional tax is not acceptable to Tamil Nadu as a portion of the tax on petroleum products would still be eligible for input tax credit, she said and reiterated her demand that petroleum products be kept out of the purview of the GST Amendment Bill.



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