Revenue loss still holds a barrier for GST implementation

Dated 22nd August, 2014

Even after the change of regime at the Centre, the BJP-governed Gujarat has again raised the issue for extra compensation for revenue losses that manufacturing States could suffer by the introduction of the Goods and Services Tax (GST).

Gujarat had flagged this issue during the UPA government, and is now seeking as compensation at least 2 per cent out of the Centre’s share of the Inter-state GST (IGST) collections.

Gujarat raised the issue at a meeting of the Empowered Committee of State Finance Ministers in Delhi on Wednesday. The Chairman of the Empowered Committee, Jammu & Kashmir Finance Minister Abdul R. Rather, told The Hindu, “Gujarat raised the issue of compensation for IGST for manufacturing States of 2 per cent but the Modi government is yet to come back to us on it.”

The other manufacturing State that has raised the compensation issue is Tamil Nadu with Chief Minister Jayalalithaa writing to the Prime Minister recently.

IGST collections will arise from the proposed tax on the sale of goods and services produced in one State but consumed in another. The Centre and the States where the sale takes place will share the IGST collections. Gujarat wants some part of such collections to be shared with the States in which the products are made.