Tamil Nadu Chief Minister J Jayalalithaa today sought more changes in the revised Goods and Services Tax Bill while maintaining her opposition to the powers being given to the GST Council, saying they override supremacy of state and Central legislatures.
In a letter to Prime Minister Narendra Modi yesterday, the copies of which were released to the press here today, she said the proposed GST Council "with the functions assigned to it will override the supremacy of the Legislature – both at the Centre and in the States in taxation matters. This is unacceptable to Tamil Nadu."
Noting that a revised draft amendment bill on GST had addressed several concerns raised by her, like keeping liquor for human consumption outside GST, she, however, pointed out that certain issues still remained to be looked into.
"The Amendment Bill also does not include enabling provisions for States to levy higher taxes on tobacco products, similar to what has been permitted for the Centre. Tobacco consumption is a public health hazard and many States including Tamil Nadu are levying higher taxes on tobacco, which should continue to be permitted," she demanded.
Pointing out that petroleum products are "still" proposed to be covered by GST under the draft Bill she reiterated that they should be kept outside the purview of GST.
A new provision has been made in the revised draft amendment Bill which enables States to levy additional taxes over and above the GST on the sale of petroleum products. However, this system of a dual levy of GST and an additional tax was not acceptable to Tamil Nadu, she said.
Referring to "State Specific Costs" vis a vis petro products and irrecoverable taxes like octroi, she said abolition of such irrecoverable dues has been sought to enable the Oil Marketing Companies (OMCs) to reduce under-recoveries" without increasing prices of petroleum products.
Noting that the State levies were not as large a burden as was being made out, she said states "have to protect their slender tax base and cannot be expected to subsidise what is essentially a Central responsibility."
Stressing that a manufacturing State like Tamil Nadu stood to permanently lose substantial revenue if GST was implemented, she said there was no assurance of a permanent compensation mechanism.
Further, the State's experience with the Centre’s compensation mechanism both for the introduction of VAT and the reduction of Central Sales Tax has been "far from satisfactory and does not inspire confidence that a fair, hassle-free and workable compensation mechanism can be implemented," she said.
Hence, it is imperative that an independent compensation mechanism for revenue losses suffered by the States should be enshrined in the Constitution itself, she urged and wanted the Centre to put in place a "simpler structure of completely delegating the levy, collection and appropriation of the substitutes for VAT, Central Excise Duty and Service Tax within a State to the State machinery with the Centre focusing on inter-State taxation."