The transition to the Goods and Services Tax regime could cost states up to Rs 90,000 crore in losses, West Bengal Finance Minister Amit Mitra told the GST Council on the first day of its two-day meeting on Tuesday, according to Mint. While the council had agreed to create a fund of Rs 55,000 crore to compensate states, Mitra added that the “tsunami of demonetisation” had increased states’ compensation requirements.
Apart from demanding increased compensation, coastal states also opposed the Centre’s proposal to take away their ability to tax offshore sales on the grounds that it would lead to a significant loss in revenue. The proposal seeks to define the 12 nautical miles of India’s territorial waters as Union Territory, thus giving the Centre the right to tax offshore transactions.
“Some states earn as much as Rs 600 crore, and Gujarat has Rs 1,200 crore from this source,” Mitra said, according to The Indian Express. Kerala Finance Minister Thomas Isaac said the proposal was “not acceptable” to coastal states. The matter has been referred to the Law Ministry for its opinion.
The Council also heard representations from various government departments and industry bodies. Union Commerce Minister Nirmala Sitharaman sought a lower GST rate for specific industries and urged the council to not end the tax exemptions for exporters. Isaac said sectors such as telecom, banking and insurance were also seeking a single tax registration and lower tax rates.
On Wednesday, the Council will discuss the matter of administrative control, on which the Centre and states have yet to reach a consensus. Several states have demanded full control over subjects such as the interstate movement of goods and services as well as businesses with an annual turnover of Rs 1.5 crore and less. Previous meetings of the council have failed to resolve the issues of dual control of taxable entities and cross-empowerment.
President Pranab Mukherjee approved the GST Bill on September 8, after it was ratified by 16 states. It was passed by the Rajya Sabha on August 3. It seeks to replace India’s complicated tax regime comprising at least 17 different charges with a single levy.