States on Thursday sought full compensation for any revenue loss for the first five years after migrating to the nationwide goods and services tax (GST).
The state had earlier agreed to the Centre’s formula to compensate states fully in the first three years and partially in fourth and fifth year. Besides this, some states demanded abolition of entry tax and compensation for 15 years if purchase tax was to be subsumed in GST.
Head of the empowered committee and Kerala finance minister KM Mani said that in totality all the states have welcomed GST, however, “the biggest concern is about the compensation, as states are worried about revenue loss.”
“The central government’s stand is to provide 75% and 50% compensation in the fourth and fifth year, while the states want full compensation for all five years,” Mani said.
He added that all the demands, in final shape, will be put across to the select committee of the Rajya Sabha which will scrutinise the GST Bill on June 16.
However, he said that the states did not discuss the contentious issue of revenue neutral rates.
The states also expressed apprehensions over the provision of allowing 1% additional tax. “Some states have objected because it will have a cascading effect,” he said, adding that he was confident about meeting the April 1, 2016 deadline for roll-out of GST.