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Jaya Flags Concerns Over Roll-out of GST

States should be allowed to give exemption on all goods of local importance without any restrictions, CM writes to Arun Jaitley

Published: 12th September 2014 06:08 AM  |   Last Updated: 12th September 2014 11:20 AM   |  A+A-

CHENNAI: Throwing light on several issues that are yet to be sorted out with regard to implementation of the Goods and Services Tax (GST), Chief Minister J Jayalalithaa has written to Union Finance Minister Arun Jaitley and her counterparts in all other States in this regard.

Recalling that the Centre had addressed some of the concerns raised by States including Tamil Nadu, she suggested that States should be allowed to grant exemption on all goods of local importance without any restrictions. Further, to avoid dual control, States should be vested with control of dealers having turnover up to `1.5 crore both for intra-State and inter-State supply of goods and services, whereby the Centre could avoid expanding its administrative machinery while collecting CGST from such dealers.

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Jayalalithaa also gave a detailed account of Tamil Nadu’s reservations about the latest suggestion of the Centre that the GST component of the levy on petroleum products could be at a very low rate or even zero-rated for an initial period of at least three years to avert any possible sudden revenue loss to the States. “There is no certainty that in a period of three years, the revenue gain on account of levy of tax on services and on import of goods would be substantial enough to offset the revenue loss on account of bringing petroleum products under the ambit of GST, nor is there any guarantee that GST will not be prematurely imposed on petroleum products,” she said and added that since the resources of the States were already limited, petroleum and petroleum products should be kept completely outside the ambit of GST.

Jayalalithaa said States should also be empowered to levy higher taxes on tobacco and tobacco products on a par with the powers proposed to be vested with the Centre to levy Excise Duty on tobacco and tobacco products in the draft Bill.

Throwing light on the ‘Place of Supply of Service Rules’ which are to be framed, Jayalalithaa said this would also play a vital role in estimating the tax revenue from services.

“Without finalising these important elements, it may not be feasible to accurately calculate the State-wise Revenue Neutral Rates. In any case, the cumulative nominal rate of GST (CGST+SGST) cannot be fixed very high, as it would appear regressive and this is bound to keep the GST rate well below the Revenue Neutral Rate (RNR) for a State like Tamil Nadu. Hence, there is bound to be huge revenue loss for Tamil Nadu,” she added.

Noting that the Gujarat government had proposed that States should be allowed to make an upfront deduction of  two per cent of the total output IGST amount levied on all the dealers in the State in a given tax period, Jayalalithaa said it had also proposed a further two per cent deduction from IGST to be credited to a ‘Compensation Fund’ maintained by the Centre. 

She suggested that all States should be permitted to retain the entire four per cent of the CGST part of the IGST on all inter-State sales without crediting any amount to a compensation fund.

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