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December 19, 2014

Bengal to lose Rs 8200 crore after GST roll out: Amit Mitra

Bengal to lose Rs 8200 crore after GST roll out: Amit Mitra

Bengal stands to lose Rs 8200 crore in revenues in the first year if the draft Constitutional amendment bill on goods and services tax (GST) is passed in Parliament in its current form, said Finance Minister Amit Mitra. The amount is almost 20% of its own revenue generation of Rs 40000 crore and 29% of the debt repayment of Rs 28000 crore. Of this, just capital repayment is Rs 9000 crore, almost equal to the revenue loss.

Alarmed at the haste of the Central government in getting the bill tabled in Parliament, Amit Mitra has written to the Chairman of the Empowered Committee, A R Rather, demanding an urgent discussion.

Bypassing States

In the last empowered committee meeting in Delhi on December 11, Bengal had vehemently opposed the proposal to bring petrol and petroleum products under GST, and the plan to do away with states’ power to levy taxes on select items or “declared goods” as provided under Article 286 of the Constitution. As many as 29 states had supported Bengal.

“The chairman of the empowered committee had told me that the draft bill would be discussed in the committee before submission to the Cabinet. But to our surprise it was cleared by the Cabinet on Wednesday undermining the empowered committee and the federal structure,” Mitra said.

Petroleum products

Elaborating the tax implications for Bengal, Mitra said that if petrol and petroleum products were brought under GST, the state would lose up to Rs 2350 crore annually. Petroleum products and tobacco are revenue earners for Bengal.

The sales tax on diesel in Bengal is 17% while that is on motor spirit (petrol) is 25%. There is also a cess of Rs 1 on both diesel and petrol along with some ad valorem surcharges.

The total revenue on this account is Rs 3000 crore. Besides petrol and tobacco, the draft GST bill also proposes to subsume entry tax and keeps CST out of the divisible pool.

Revenue loss

According to Dr Mitra, the state would lose between Rs 1200 crore and Rs 1500 crore on account of entry tax while the loss from tobacco will be Rs 350 crore.

“The major blow will be CST. At present, the total dues of all states from the divisive pool is Rs 78000 crore while our due is Rs 4500 crore from 2010. Under the GST bill, the Centre will offer only Rs 11000 crore to the states of which our share will be Rs 400 crore. The perpetual loss every year on this account will be Rs 2600 crore from the second year of GST rollout,” he said.