The Empowered Committee of state finance ministers has decided to keep petroleum and alcohol out of the proposed Goods and Service Tax (GST) citing that these were the main sources of income for states. The government, in its revised draft of the constitution amendment bill, had proposed that fuel and liquor should be brought under the ambit of GST. The committee is of the view that if alcohol and petroleum are included in GST, it would decline the revenues of the states.
Further, the committee has also decided that there should not be a provision for certain goods in GST bill, which was declared by the government as goods with special importance. The Committee also expressed need for reservation on restriction of powers of the proposed GST council to recommend any special provisions, like an exemption from tax to a state without the Centre government permission. Furthermore, the committee is also planning to set up an independent mechanism to pay compensation to states that stood to lose with the introduction of the GST. Moreover, the states are also opposing subsuming of entry taxes levied on goods entering from other states.
The implementation of GST will replace the plethora of indirect taxes levied by states and the centre with just one tax. Under the GST regime, both the centre and states will have powers to tax supply of goods and services from primary stage to final consumption. The new GST system is expected to help all stakeholder including governments, consumers and business by preventing leakage, cascading of taxes and lowering the incidence of tax.
