Finance Minister Yanamala Ramakrishnudu has said the Constitutional Amendment Bill for introduction of Goods and Services Tax may go against the spirit of fiscal federalism if passed in the present form by Parliament. The Bill was passed by the Lok Sabha on Wednesday.

Mr. Ramakrishnudu speaking at a two-day inaugural session of the GST Empowered Committee of State Finance Ministers in Tiruvantapuram on Thursday said the State was committed to the implementation of unified and harmonised tax regime but disappointed that important issues raised by him in earlier EC meetings were not considered by the Union government. He hoped the Rajya Sabha would consider the issues raised by the States before passing the Bill.

He demanded that the State governments should be empowered to administer the GST Tax on inter-State trade and commerce levied under Integrated GST (IGST).

The proposed amendment Bill would empower the Centre to levy tax on tobacco and tobacco products in addition to the GST.

However, the same power was denied to the States and it would result in substantial revenue loss to the States. Similarly subsuming advertisement tax, betting and gambling tax would have adverse impact on revenues of local bodies.

The Centre’s response has been lukewarm to the unanimous resolution of the empowered committee for giving constitutional guarantee against the loss of revenue to the States because of GST implementation.

There were reasons to fear that the States would be at the mercy of the Centre for GST compensation as has been the case with the Central Sales Tax compensation.

There should be explicit provisions in the Constitutional Amendment Bill to protect and preserve the fiscal autonomy of the States, he said.

Mr. Ramakrishnudu said the composition of GST Council, the apex body for GST administration, was such that it would give one third voting power to the Centre.

Thus the Centre would have virtual veto power over the States on all the decisions of the GST Council, he said.