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Saturday, May 03, 2008
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Panel to discuss goods, services tax

Special Correspondent

Empowered Committee of State Finance Ministers to meet on May 5

T.M. Thomas Isaac says Kerala wants the new tax to be shared in a fair manner.

THIRUVANANTHAPURAM: The Empowered Committee of State Finance Ministers, meeting at Kovalam, near here, on May 5, will discuss policy issues related to the proposed introduction of goods and services tax in 2010-11. The meeting is also expected to thrash out differences between the Centre and States on the proposed reduction of Central sales tax from 3 to 2 per cent.

Kerala Finance Minister T.M. Thomas Isaac told journalists here on Friday that the goods and services tax was proposed to replace excise duty and service tax, collected by the Centre, and value added tax (VAT), collected by the States. Kerala wanted the new tax to be shared in a fair manner. It was not just sufficient that the States did not suffer any revenue loss under the new regime. The service tax, now being collected by the Centre, actually belonged to the States.

The Minister said the meeting would discuss items to be excluded from the goods and services tax. Kerala was for excluding petroleum products and liquor. An understanding would have to be evolved on the goods and services on which the Centre and the State should collect the tax.

He said the reduction of Central sales tax, proposed for this year, had been put on hold as that would cause losses to States, especially those with higher production. The Centre had suggested an increase in VAT rates and the tax on textiles to offset the loss.

Dr. Isaac said that measures taken by the Centre for checking price rise were not effective. Price rise should be tackled though fiscal controls. Adjustments in monetary policy would not yield significant results when interventions such as regulation of foreign trade and ban on futures trade were called for.

He said the Gulati Institute of Finance and Taxation and the State Planning Board would jointly organise a two-day seminar on Centre-State financial relations in the context of the 13th Finance Commission to coincide with the meeting of the committee. Dr. Isaac said that States were generally concerned about the listing of Centrally-sponsored schemes among the committed expenditure of the Centre in the terms of reference of the Finance Commission.

The commission would consider only revenues excluding committed expenditure of the Centre for apportioning between the Centre and the States.

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