GST will benefit both consumers and states from Day 1: Arun Jaitley

The proposed goods and services tax (GST) will benefit most of the states from day one, especially the consumer states, finance minister Arun Jaitley said today.

He also allayed any apprehension among the states about the fall in their revenue collections, saying that provisions have been made in the Constitution Amendment Bill on GST to ensure that none of them lose any revenue after the implementation of the GST.

Speaking at the meeting of the Parliamentary Consultative Committee attached to his ministry, he said GST will help reduce tax-on-tax and will be beneficial to consumers.

As the volume of trade expands and growth momentum picks up, every state will benefit with the rise in their revenue collections, he added.

A Constitutional Amendment Bill on GST was introduced in the Lok Sabha on 19 December. It would be taken up by Parliament in the next session.

Government intends to roll out GST, which will subsume most of the indirect taxes, from 1 April 2016.

Jaitley said GST will be beneficial to the Centre, states, industrialists, manufacturers, the common man and the country at large since it will bring more transparency, better compliance, increase in GDP growth and revenue collections.

He also said government was open for any suggestion for making further improvements on the GST Bill.

"GST is a continuing process which would further evolve and improve with time," said a statement quoted him as saying.

He mentioned that it is proposed to levy a non-vatable additional tax of not more than 1 per cent on supply of goods in the course of inter-state trade or commerce.

The finance minister said this tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the states from where such supplies originate.

He further said that the states have been ensured that there will be no revenue loss and the centre will compensate states for any loss of revenue arising on account of implementation of the GST for a period up to five years. He said that a provision in this regard has been made in the Constitution Amendment Bill. He said that the compensation will be on a tapering basis, ie, 100 per cent for first three years, 75 per cent in the fourth year and 50 per cent in the fifth year.

The government, he added, was in favour of strengthening the cooperative federalism and will make all out efforts to evolve as much consensus as possible on GST.

The finance minister said most of the committee members supported the decision of the government to implement GST.

"They said since the number of departments will also reduce in due course, which, in turn, will lead to less corruption," it added.

Members also made suggestions, including that the Centre may bring out a 'white paper' giving details on revenue to the Centre, states and who will be the ultimate beneficiaries.

A member also suggested the Finance Commission may be made a permanent body for allocation of funds to states.