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State gears to lobby against Centre's GST proposals
August, 18th 2010

Madhya Pradesh will once again try to gain support of various finance ministers on goods and service tax (GST) at the state finance ministers meeting to be held in New Delhi tomorrow. It will try to lobby against the Centres proposals, provisions and calculations on GST with Uttar Pradesh and Tamil Nadu, as both the states hold the key in passage of the Bill to be introduced in the Parliament.

Earlier this month, speeches of Commercial Tax Minister Uttar Pradesh, Nakul Dubey, Finance minister Tamil Nadu, K Anbazhagan, Chief Minister of Karnataka, B S Yeddyurappa, Finance Minister of Gujarat, Saurabh Patel, and Commercial Tax Minister of Chhattisgarh Amar Agrawal strongly opposed the GST as its proposal strips off state from their financial independence and power vested in them by Indian Constitution to impose taxes.

"State Finance Minister Raghavji is opposing the nature of the GST as proposed by Central government, it is anti-constitutional and in tomorrows meeting he will strongly oppose it in its present form," a government source told Business Standard, "The revenue losses calculated by state government will touch Rs 2,217 crore by 2011-12 at 16 per cent GST as proposed by the Centre.

The growth in service tax was 15.99 per cent during 1999-2000 which has now slipped to (-)16.74 per cent. It is an impractical approach on the part of the Centre to impose GST in India."

Madhya Pradesh finance minister Raghavji had opposed the GST by contesting the calculations on tax rate growth and its nature. On the 4th of this month, Gujarat Finance Minister Saurabh Patel in his speech mentioned, "We feel that concurrent powers for centre and state to legislate on goods and services would confuse matters further and nowhere has it been made explicit that whose writ would prevail in case of conflict."

Similarly, K Anbazhagan, finance minister Tamil Nadu said, "Tamil Nadu will not lag behind in implementing beneficial tax reforms. We feel that the objectives of GST can be achieved without altering the basic structure of the Constitution, by enacting separate legislation by each state in line with national model.

Thus, while we broadly support a transition to GST, we will not compromise on the autonomy of the states or basic Constitutional framework.

In his speech (printed copy distributed in the meeting), Yeddyurappa, who was not present had mentioned, "We have estimated Karnataka would lose about Rs 6,000 crore for the current financial year if the proposed rate structure is applied in the state.

As state earlier, the RNR (revenue neutral rates) for Karnataka because of its high tax/GDP ratio works out to 19 per cent. We understand that it may be difficult to have a rate of the upper slab at 19 per cent but we would press for a rate that is between 15 per cent and 19 per cent. Therefore rates of 6 per cent and 10 per cent suggested by the government of India are not acceptable at all."

Dubey had also refused to accept the GST as it does not gel with Constitutional provisions. The Madhya Pradeshgovernment has also decided to challenge the GST in Supreme Court.

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