CHANDIGARH: Haryana excise and taxation minister, Kiran Choudhary, on Monday urged the Empowered Committee of state finance ministers as well as Union finance ministry to work more resolutely for bringing about tax reform in the country at an early date.
Choudhry was speaking at a meeting of the Empowered Committee of state finance ministers in Bhubaneswar today.
She said that it may take some time before GST is finally introduced, in the meantime it is equally important that loss being caused to the states on account of reduction in the rate of CST from 4 per cent to 2 per cent is fully compensated by the Central government.
She pointed out that CST collections have taken a massive hit by showing decline of nearly 38 per cent. The state is losing very heavily on account of reduction in the rate of CST and non-payment of the compensation by the Central government. She also stressed the need taking corrective steps.
Choudhry said that upto December 2012, Haryana has shown an increase in VAT collection by about 17 per cent as compared with that of the same period of the year 2011. She said that upto December, 2011 total VAT collection was about Rs 9,150 crores which in the corresponding period for 2012 was Rs 10,709 crores. Collection of VAT revenue accordingly is satisfactory in Haryana.
Incase the recommendations of the Committee for 75 per cent and 50 per cent compensation in the years 2011-12 and 2012-13 respectively is accepted, it will result into loss of approximately Rs 2600 crores to the state. It is a huge amount of money for a small state like Haryana, but in the overall circumstances as explained by the committee on CST compensation, we accept the recommendation, she added.
The committee however has not specified the time period during which the compensation will be released. We would desire that the entire amount of withheld compensation should be partly released in the current financial year that is 2012-13 and remaining in the next financial year that is 2013-14. Extending the time period beyond 2013-14 will not only cause hardship to the state but it may create unforeseen complications, she added.
She pointed out that the officials of the Union finance ministry have made a serious calculation error which has resulted into double deduction from the compensation claim of Haryana on account of one per cent extra compensation granted to the Maruti Udyog Limited (MUL).
The Haryana state had accounted for this loss while filing its compensation claim, but the Union finance ministry has made double deduction for the same reason.
"While I may request the representatives of Union finance ministry to resolve this issue at an early date, I may also request the Empowered Committee to resolve that in future while finalising the due compensation claim of the states, prior consultation with officers of the states should be held to avoid such errors", she added.
She suggested that a workable model of GST should inter-alia take into account with features like robust IT infrastructure. She said that in her considered view the Union finance ministry or the Empowered Committee should get a standard design for the IT infrastructure on GST prepared, and a proof of concept of such a model should be presented to all the states at the earliest possible.
All the states thereafter should be given time to orient their infrastructure with this standard design. Needless to mention that this will be a time consuming activity.
After the proposed amendment of the Constitution comes through, a central legislation containing the structure of GST will be prepared on the basis of which system of GST will be regulated. "In my view a committee of experts comprised of legal and taxation experts should be constituted to prepare a draft legislation which may form the basic document for discussion amongst the states and the other stake holders", she added.
She said that several issues like role and functions of GST council, central authority for redistribution of taxes on account of inter-state sales; arbitration of disputes between central authorities and the state authorities; dual control; administrative infrastructure to be created for both the Central government and the states; revenue neutral rates etc also needs further detailed examination. Separate groups of experts for giving recommendation on each of these issues should be set up.
She said that if CST at a rate of two per cent is retained, then RNR of the state declines significantly and comes at around 12.50 per cent, that is in the same range as computed by the NIPFP. Accordingly, to keep the RNR of the state at a reasonable level of 12 to 13 per cent, CST at a rate of two per cent needs to be retained even after the GST is actually implemented.
Haryana min for early tax reforms, seeks compensation for states
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Haryana min for early tax reforms, seeks compensation for states
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Haryana min for early tax reforms, seeks compensation for states
