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Settlement of state's claim pre-condition to Goods and Service Tax regime
December, 07th 2010

The Mayawati government on Monday demanded an early settlement of its claim for Rs 2,527.93 crore from the Centre and set it as one of the pre-conditions for enforcing the Goods and Service Tax (GST) regime, proposed to be implemented throughout the country from 2011, as per its schedule.

The view point was conveyed by UP's institutional finance minister, Nakul Dubey at a meeting of the Empowered Committee of finance ministers, held in New Delhi.

The minister said that the Centre should abide by its promises and take decision about early settlement of the state's claim, if it was sincere and honest about its intention. The claim put up by UP, he said, was based on the calculation of loss suffered by it on the Central taxes on account of the Value Added Tax (VAT) regime for the financial years of 2007-08, 2008-09 and 2009-10.

He said these dues remained unsettled despite repeated reminders sent to the Centre. The non-payment of these dues, he said, had created a sense of distrust and this had made the state skeptical of the Centre's move and promises under the GST regime. He said the Centre should clear doubts on this count by immediately responding the state's request to settle its claim without further delay.

He said that he was at a loss to understand as to why there was a delay in the settlement of these claims, when they had been calculated strictly in accordance to the guidelines issued for this purpose by the Centre.

Further pressing his point of view, he said the empowered committee should take into the account the suggestions given by different states and should also assess the impact of the GST regime on the state finances. He said the Centre should also set up a statutory body for settling the claims put up by the state governments for the loss due to switch over of new taxation regime and these claims should be settled without any delay.

Referring to the proposal for raising the threshold limit of the Central Excise duty from existing Rs 5 lakh to Rs 10 lakh for units of Rs 1.50 crore under the new GST regime, he suggested it should be rationalised by fixing it on units up to Rs 3 crore. Opposing the proposed increase, he said, this would bring all small-scale industry within the ambit of the Central Excise duty and this would be counterproductive to the growth of small-scale industries as well as the state's finances.

He further said that the right of the state should not be curbed in deciding the taxation structure of certain commodities widely used and produced locally. Under the present set up of the GST regime, he said only 99 commodities had been identified for tax-exemption. This, he said, was not correct, as this way the state would not be able to give relief to its people of tax-exemption on a large number of commodities needed by them for daily use. All these commodities would be brought within the ambit of 16% tax and would be inflationary in nature.

As for UP, he said, the state would be at a great loss under the GST regime, as it would not get the benefit of taxation on the export of its surplus foodgrain to other states. He thus sought the changes in the GST regime to make it suitable to the state and said that the Centre should take the state into confidence before its implementation.

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