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Uniform ST: action against erring states
Tribune News Service

NEW DELHI, June 22 — The Conference of Chief Ministers today decided to penalise the states that do not comply with implementing uniform floor rate of sales tax and sought a final report by July 10 from the erring states.

At the one-day conference of the Chief Ministers on Domestic Trade Tax Reforms and Value Added Tax, here it was decided that there should be cent per cent compliance by all states and Union Territories and should be reported to the Standing Committee of State Finance Ministers.

Briefing correspondents of the decisions taken, the Minister of State for Finance, Mr V Dhananjay Kumar, said any state that did not comply with respect to floor rates and sales tax related incentive schemes, would lose 25 per cent of Central Plan Assistance with immediate effect.

At the last meeting, four states/UTs of Bihar, Arunachal Pradesh, Mizoram and Pondicherry did not comply. Of these, barring Bihar, all others have done so or were in the process of implementing the decision.

Regarding automobiles and IT items, it was decided that existing floor rates would not be altered and that there should be cent per cent compliance also in respect of sales tax related incentive schemes, except for North-East and special category states like J and K and Himachal Pradesh. The final list of pipeline cases will have to be communicated to the Standing Committee by July 10.

The meeting of the Standing Committee of State Finance Ministers will be preceded by a meeting of all Finance Secretaries to discuss the report on Central Sales Tax prepared by the National Institute of Public Finance and Policy.

Mr V. Dhananjay Kumar said that the Standing Committee would now function as the Empowered Committee of the Committee of Chief Ministers whose decisions would be binding.

The Committee comprised Finance Ministers of West Bengal, Madhya Pradesh, Uttar Pradesh, Maharashtra, Gujarat, Punjab, Delhi, Meghalaya and Karnataka.

He said the Centre assured the states to make up for loss of revenue on account of abolition of Central Sales Tax or introduction of Value Added Tax. This can be discussed in the Standing Committee and decided after studying all relevant issues, he said.

States like MP, Maharashtra, Karnataka and Delhi had informed the meeting that they were going ahead with preparation for changing over to the VAT system from April 1, 2001.

On the issue of levying professional tax, there was a consensus that the power to fix the limit be given to the states by amending the Constitution.

On the demand by the State Finance Ministers to allow them to levy additional service tax, the Standing Committee will interact with the expert committee on service tax and also give its recommendations which was expected to be submitted by September 30, this year.

‘Lower taxes on agro inputs’
From T.V. Lakshminarayan
Tribune News Service

NEW DELHI, June 22- The Northern states of Punjab, Haryana and Himachal Pradesh today urged the Centre to lower the tax rates on major agricultural inputs like fertilisers and pesticides to help reduce the cost of foodgrains.

The demand was made by the Chief Minister of Haryana, Mr Om Prakash Chautala, the Chief Minister of Himachal Pradesh, Prof Prem Kumar Dhumal, and the Finance Minister of Punjab, Capt Kanwaljit Singh, at the Chief Ministers’ conference on domestic tax reform here.

Capt Kanwaljit Singh informed the conference that as per the decision of the Chief Ministers’ conference on November 16, 1999, to bring about uniformity in sales tax throughout the country on 206 items, the state had complied in 90 per cent of the items. He said Punjab had not implemented uniform Sales Tax in liquor, diesel, fertiliser and pesticides. He said the State would follow the agreed rate of tax on liquor with effect from April 1, 2001 after the lapse of the current excise contracts.

On the tax rationale adopted by the Punjab Government, the Finance Minister said the state was levying tax on the end products which was against the national consensus. He said his government was doing this as it believed that this would help reduce the cost of foodgrains which would be in the larger interest of the public.

He also pointed out that there was variation in phasing out sales tax related incentives. He said the Chief Ministers’ conference last year had decided unanimously that sales tax incentives offered to the industries, except for those in the pipeline, would be discontinued, and urged that the conference take a consensus view on whether a state should continue with the exemption to the incoming Information Technology industry and other industries with massive investments of above Rs 100 crore.

The Minister also pointed out that Punjab was suffering huge loss of revenue on account of lower rate of tax (1 per cent) notified by the Union Territory of Chandigarh in respect of sales made to the dealers registered in the state of Punjab. “This concession combined with the facility of consignment and branch transfers had played havoc with the revenue of Punjab”, he added.

Capt Kanwaljit Singh said it was important that the uniform floor rate in respect of inter-state sales should be fixed and the same should be common for all States.

He said the Centre had given an assurance that it would implement agreed floor rates in the UTs.

Referring to a proposal with regard to reforms in the Central Sales Tax (CST), he said any reforms to be made in the CST sector should not be carried out or discussed in isolation. He said in this regard there was a need to discuss the following three issues:

— Any reforms in the CST have to be linked to the devolution of powers to the state governments;

— States like Punjab, which would lose heavily in case of a reduction in CST, should be adequately compensated for the loss that could accrue due to the proposed reforms;

— States should be given powers to tax items like sugar, textile and tobacco.

The Haryana Chief Minister, Mr Chautala, urged the Centre to bring down to zero the floor rate of tax on goods being utilised for agricultural production like chemical fertilisers, insecticides and diesel from the present level of four per cent.

He also urged the Centre not to rush with the introduction of Value Added Tax (VAT) without understanding its implications on the finances of the states. He added that a reduction of even 1 per cent of CST would lead to a loss of Rs 150 crore to the State and if the CST was abolished then the loss would be around Rs 600 crore.

Mr Chautala said the implementation of the Fifth Pay Commission report had increased the financial burden on the states and urged that the Central Government should share a part of the burden. He also called for a discussion on the issue of non-productive bonus to employees.

The Chief Minister also raised the issue of sharing the Re 1 cess levied on petrol and diesel and wanted that it be distributed among the states on the basis of consumption of oil in the states.

The other demands made by Mr Chautala included bringing foodgrains and cereals under the ambit of sales tax, permission be granted to states to utilise the financial assistance recommended by the Tenth Finance Commission and increase in Central assistance every year by 15 per cent.

The Chief Minister also advocated larger allocations for the National Capital Region Planning Board for utilisation by Haryana which was bearing the burden of the burgeoning population of Delhi.

The Himachal Pradesh Chief Minister, Prof Dhumal, demanded that Himachal Pradesh should be exempted from implementing floor sales tax rate on diesel on the pattern of North-East states keeping in view the mountainous topography and having road transport as principal mode of transportation.

He requested the Centre to exempt special category states from withdrawing sales tax incentives to the industries on the pattern on the North-East region due to similar geographical and locational disadvantages.

He said VAT should be introduced from April one, 2002 instead of April 1, 2001, as was being proposed by the Centre. He said central sales tax should be progressively brought down on all items to zero percentage to encourage free trade amongst the states.