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Confusion in states over GST, VAT to stay in budget for most

Outstanding issues like ‘dual control’ to divide the administrative, auditing and assessing--basically who will tax what--powers have remained unresolved.

india Updated: Jan 23, 2017 12:32 IST
HT Correspondents
Mamata Banerjee’s party blocked GST in Parliament; her government will focus on state excise and taxes on vehicles to generate revenue.
Mamata Banerjee’s party blocked GST in Parliament; her government will focus on state excise and taxes on vehicles to generate revenue.(PTI)

Most states governments will not have the nationwide goods and services tax (GST) in the budget for the next fiscal as uncertainty over introducing the tax reform from the next financial year continues.

The GST council is meeting this week but most of the outstanding issues like “dual control” to divide the administrative, auditing and assessing--basically who will tax what--powers have remained unresolved with states seeking more control.

Many states, such as West Bengal, want control over all businesses with an annual turnover of Rs 1.5 crore or less covering small traders and want full control over regulating inter-state movement of goods and services.

State finance departments, because of continuing differences, have decided to have indirect tax proposals such as value added tax (VAT) and luxury tax like previous years in the budget but will keep a window for possible introduction of GST from September. Here is what some states are planning:

Madhya Pradesh

The state’s finance department is discussing possible impact of introduction of GST from September. “This problem is there all over the country. But till the GST is rolled out we will consider that there is no GST, hence it would be like a normal budget. Taxes like VAT and other taxes will be a part of the budget. However, since GST is a constitutional promise it is bound to come by September we have to be prepared for that too and we have to do all the permutations and combinations”, said Finance minister Jayant Malaiya.

Malaiya said GST was definitely an issue at the time when there were going to present to budget in the ensuing budget session and said that issue was under discussion.

Telangana and Andhra Pradesh

The Telangana government will go ahead with its normal budgetary preparation with its taxation structure as usual.

“We do not know when the GST is going to be introduced by the Centre. But we are expecting that there would be some indication from the Centre in the budget,” Telangana principal secretary (finance) K Ramakrishna Rao told Hindustan Times.

He added that changes in tax structure will be made when GST comes into force.

Likewise, the Andhra Pradesh government, too, will have its normal budgetary preparation for the next financial year.

Tamil Nadu

The delay in roll out of GST has given some respite to the state reeling under heavy fiscal deficit on account of popular subsidy schemes and natural calamities. The state, which opposes the present GST formula fearing revenue loss, has been saved for the time-being.

As it is Tamil Nadu has a huge fiscal deficit, on account of a plethora of Amma schemes and subsidies, so in the case of Tamil Nadu, GST roll out delay is a lucky though temporary escape, said Prof S Janakarajan of Madras Institute of Development Studies.

Tamil Nadu will roll out a normal budget without mentioning GST.

West Bengal

The West Bengal government is going ahead with its normal budget after the ruling Trinamool Congress blocked GST in Parliament.

“We will continue with existing tax system,” a senior finance department official told HT. State finance minister Amit Mitra, who also heads GST Council, and the state finance secretary, H K Dwivedi was available for comments.

Officials said there was no “Plan B” as the GST bill is unlikely to be passed in Parliament soon. The state budget will focus on state excise and taxes on vehicles to generate revenue, he added.

Jharkhand

Jharkhand government has decided to go ahead with its existing budgetary system till the confusion prevails on introduction of GST by the Centre.

“The GST has not much to do with budget preparations. Therefore, we are going with normal budgetary preparations,” said Satyendra Singh, secretary (expenditure) of Jharkhand finance department.

Singh said Jharkhand’s revenue will increase with introduction of the GST and the state may increase allocation for welfare schemes.

(With inputs from Sumanta Ray Chaudhuri in Kolkata, Ranjan in Bhopal, Srinivasa Rao Apparasu in Hyderabad, Sanjoy Dey in Ranchi.)