The losses to be incurred by Tamil Nadu, being a manufacturing State, on account of implementation of Goods and Services Tax, would be offset by higher tax collections on services, according to a tax expert.
Tamil Nadu has expressed concern over GST, like the final rate which proposed to be 18 per cent,m and the power of vote in the GST Council. The State has pegged the annual revenue loss due to implementation of GST at over Rs. 9,000 crore.
“The losses on account of implementation of GST to Tamil Nadu would be more than offset by higher collection of service taxes. Remember Tamil Nadu is also high consumption state,” V.S. Krishnan, advisor, Tax Policy, EY, and a former member (service tax and GST) Central Board of Excise and Customs, told The Hindu .
Many States, including Tamil Nadu, had similar apprehensions when Value Added Tax was implemented. But post implementation of VAT, the State VAT collections had been robust across the States.
Mr. Krishnan said the revenue buoyancy, post VAT implementation, in States such as Tamil Nadu and Gujarat could have been even higher, but the States had some generous sales tax deferral schemes.
According to data from ratings agency ICRA, The Tamil Nadu Value Added Tax Act 2006 has come into effect from January 1, 2007. The sales tax collections grew 14 per cent in 2007, 2 per cent 2008 and 14 per cent again in 2009, it said.
Mr. Krishnan said that GST would help States plug the loophole and enable the State in robust tax collections. There was a need for a GST Secretariat in each State to address the day-to-day issues relating to implementation of GST.
“State GST secretariats will bring together central government and state government offices in one place. It should be a registered body under the Society’s Act,” he added.