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States raise concerns over GST impact on revenue

* Decide to inform govt about losses due to subsuming of taxes under GST

State finance ministers on Monday decided to inform the 14th Finance Commission about the revenue losses they will incur due to subsuming of various state levies under the proposed Goods and Services Tax (GST).

States would also inform the commission about the expected widening of their tax base by getting to levy tax on services under GST and whether it would be sufficient to offset their revenue losses. Taxing services now is the exclusive domain of the Union government.

?We would inform the Government of India the impact of GST on states’ revenues. We have prepared a report about the revenue gains and losses under GST, which the Centre would share with the Finance Commission,? said Jammu & Kashmir Finance Minister Abdul Rahim Rather, who chairs the Empowered Committee of State Finance Ministers.

The Finance Commission would suggest a formula to devolve the divisible pool of taxes to states under the existing formula and make recommendations on how to adjust it in the light of tax changes that would take place after GST is introduced, said a finance ministry official with the union government.

The Commission is required to give a formula for transferring certain tax revenue to states for five years from 2014. It appears that in the next two years, sharing of taxes would happen under the current tax regime as GST is unlikely to be implemented this year or the next.

State finance ministers who met here also discussed the unpaid central sales compensation to states. The union finance ministry has informed that the dues would be given only after national polls as the model code of conduct prevents any payments now.

Ministers also decided to set up a panel led by Rashmi Verma, Additional Secretary (Revenue) and Satish Chandra, Member Secretary to the Empowered Committee to study issues like business processes, registration and filing of returns under GST.

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First published on: 11-03-2014 at 05:48 IST
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