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Budget build-up: States want sales tax power on e-commerce

States demanded more resources, infrastructure and a wider ambit to bring e-commerce under sales tax on Friday as they met finance minister Arun Jaitley to set the ground for the first comprehensive budget.

business Updated: Dec 27, 2014 00:53 IST
HT Correspondent

States demanded more resources, infrastructure and a wider ambit to bring e-commerce under sales tax on Friday as they met finance minister Arun Jaitley to set the ground for the first comprehensive budget from the Narendra Modi government due in February.

At the same time, they endorsed the Centre’s call for an early roll-out of the goods and services tax (GST) while emphasising on compensation for possible revenue loss arising from the nationwide levy.

They wanted Centrally Sponsored Schemes (CSS) in which the Delhi government uses its purse strings to monitor states to be decentralised.

Jaitley said regional disparities need to be addressed by evening out growth between states and the GST would be “hugely beneficial” to all as he demanded a collaborative effort. He noted that most states had welcomed the central government’s provision to set apart Rs 11,000 crore in the current fiscal year for GST compensation.

“We have assured that any state suffering any loss due to GST implementation would be fully compensated,” the minister said after the meeting in the run-up to the budget for 2015-16.

According to sources present at the meeting, state governments requested the Centre to bring an amendment in the Central Sales Tax Act to help them include e-commerce transaction under their ambit. With internet driving sales, old geographical barriers are coming down, and states do not wish to let go off revenues in the process. Sales tax is a state subject under the Constitution.

At present, states are not allowed to charge any tax on e-commerce transactions.

States also wanted more development finance allocation directly to states, besides tax holidays that could help them attract investments.

Mining states called for the removal of export duty on iron ore. All the states also requested higher borrowing limits keeping in view fiscal responsibility requirements under law. They also wanted loans to be cheaper.

Some states called for more funds for urban renewal mission and encouragement to small and medium enterprises.

“Some asked for declaration of water as a national asset, restructuring of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act scheme) and provision of remunerative price mechanism for agriculture produce in lieu of minimum support price (MSP)…,” a finance ministry statement added.

“We will take all these suggestions into consideration while formulating policies for the Budget,” Jaitley added.

During the meeting Jaitley said that the biggest challenge before the country was to increase the growth rate as it would boost both economic activities and revenue collections.

“... As per different estimates, our growth rate would be above 6 per cent during 2015-16,” he said, observing that the services sector had shown good growth while growth in manufacturing sector was a bit patchy.