Assam in favour of GST, but wants petro products out

Dated 2nd December, 2014

On Goods and Services Tax (GST), the Assam government has made its position clear. It said it supported the introduction of GST, but wants petroleum products to be outside the purview of it.

"Government of Assam supports the introduction of GST which is considered to be the most significant indirect tax reform since independence. However, I firmly believe that there is an imperative need to keep the petroleum products outside GST," said Assam Chief Minister Tarun Gogoi in a memorandum submitted to Prime Minister Narendra Modi during the latter's recent visit to the state.

He said since many other state taxes and Central Sales Tax (CST) would get subsumed into GST, that would have a "severe adverse impact" on state's own tax revenue. Gogoi said it would not be possible to compensate the loss of revenue by service tax, which would accrue to the state of Assam, because the service sector in Assam and the northeastern region was still at a nascent stage.

"We have genuine apprehensions that introduction of GST may cause serious revenue loss to the states, the quantum of which is likely to increase with time. Perhaps in recognition of this fact that the Parliamentary Standing Committee has recommended suitable amendments in the Constitutional Bill for providing built-in permanent compensation mechanism," added Gogoi. Gogoi requested the Prime Minister "to allay the apprehensions of the states" about the future revenue loss on account of introduction of GST. He said the likely revenue losses may be quantified in consultation with the states and compensation provided against the same.

Gogoi also asked the Prime Minister to "kindly ensure" that Assam got its share of royalty on crude oil and VAT (value added tax) as well as other taxes on actual market price and not on the basis of heavily discounted sale price.

"It is pertinent to draw your kind attention to the recent decision of the Gujarat High Court on a petition filed by the Gujarat government, where the court held that the royalty shall be payable to the state on market price of crude oil and not on post-discount price," said Gogoi.

The ministry of petroleum and natural gas has been allowing Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Ltd (OIL) to supply crude oil to the oil marketing companies (OMCs) at highly discounted rates. The ministry has asked them to pay royalty on crude oil to the states on the basis of the subsidised price. The amount of discount has at times been as high as 90 per cent or more.

This has resulted in cumulative loss of revenue of more than Rs 10,000 crore to Assam since 2008-09, said Gogoi.

"You would agree that a special category state like Assam cannot afford such a huge loss of revenue. Moreover, the oil producing states like Assam should not be denied the benefits of their natural resources and made to compensate for the under recoveries of the central OMCs," said Gogoi.

(This article is published in Business Standard on 2nd Dec,2014)