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GST loss to be reduced by slice of service tax
April, 28th 2017

Even as the Jharkhand assembly on Thursday ratified the state Goods and Services Tax Bill, 2017, experts said the state will suffer significant losses under the new tax regime expected to be rolled out on July 1.

Under the GST regime, taxes will be levied at the place a particular commodity is consumed instead of the place where it is produced. Jharkhand being a production-centric state in terms of iron and steel, aluminium, copper, heavy motor vehicles and cement, will not be benefited whereas the destination states where the finished products reach would gain in terms of tax.

The state hopes to compensate for this loss from a share of the service tax worth around Rs 2,700 crore that it is likely to be received from the Centre. Additional chief secretary, planning and finance-cum-development commissioner Amit Khare said the Centre has also agreed to compensate the states suffering losses for the first five years.

"The exact volume of losses or the rate at which the Centre will be required to compensate is not known because the list of items to be placed against the five tax slabs of 5%, 12%, 18% and 28% is yet to be finalised," he said. Khare also added that since the state governments would now get a share of the service tax, which was earlier solely collected by the Centre, job contracts and other service sectors would add to the kitty of the state exchequer.

While royalty on coal, iron ore and other minerals obtained by the state will remain unaffected, the state would be at its liberty to levy taxes on petrol, diesel, crude oil, natural gas, aviation fuel and liquor as these items have been kept out of the purview of GST. The state will also be able to levy taxes on goods and services brought into Jharkhand through e-commerce.
Addressing the media, urban development minister C P Singh said that for effective implementation of GST, the state has constituted a GST advisory committee comprising members of Federation Chamber of Commerce, chartered accountants and the bar association. "PWC has been appointed as consultants for the GST implementation and training of stakeholders which includes chartered accountants and government officials," he said.

The minister ruled out apprehensions of traders in registering for the GST saying that of around 1.25 lakh people registered under the prevailing system of sales tax, more than 55,000 have registered for the new tax system. "It is because the GST registration has been made mandatory for those having an annual turn over of over Rs 20 lakh whereas it was fixed at Rs10 lakh under the previous system," Singh said.

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