Tax would indirectly benefit multinational firms.

The BJP-ruled Madhya Pradesh government has alleged that the Centre has planned to impose goods and services tax (GST) to indirectly benefit the multinational companies.

The government today reiterated that it would not adopt GST. Madhya Pradesh is the first state to refuse GST on grounds of losses of Rs 2000 crore annually to the state.

State Finance Minister Raghavji, while speaking to Business Standard, cautioned not only against haste in introducing GST, but alleged that states would have reduced fiscal autonomy and multi-tax system.

The new tax system will escalate prices of commoner items and will reduce prices of luxury items. It is not in the interest of the poor, he said.

He added that the central government never wanted the states to stay autonomous in terms of financial independence.

After GST, the state will have to lose a maximum of Rs 2,000 crore annually. The rate of tax will vary from 1 per cent to 12 per cent and will be more on petroleum products. But we will lose Rs 700 crore at one go as we will have to remove central sales tax, the minister said.

In addition to service tax, there will be five slabs 1 per cent, 5 per cent, 8 per cent, 12 per cent and another slab for petroleum products. This will create an ambiguity and traders will have to face authorities at the central and state levels. They will also have to file separate returns for state and central level taxes, he added.

The new tax system would replace excise duty and service tax at the Centre and value-added tax (VAT) and local taxes at the state level.

Besides Madhya Pradesh, Chhattisgarh, Haryana and Tamil Nadu also have reservations on GST. We are not strictly opposing the GST but we want the Centre should not impose it in haste, Raghav ji said.

He said even foodgrain would attract tax and as a result, not only traders but farmers will also be affected with the new system.