Finance Minister Jaitley Tuesday made a strong pitch in favour of early passage of the constitutional amendment bill to implement a common goods and services tax across the country. Urging the members to support the India’s biggest tax overhaul since independence, Finance Minister said it would enable the states to get a share in the service tax collected by the centre.
As per the Indian constitution, states can not levy and collect taxes on services whereas services form the biggest part of Indian economy as they account for nearly two third of India’s GDP.
Responding to the members’ queries during the question hour, the finance minister urged them to expeditiously pass the GST bill to enable states to get a share of the Service Tax which is not shared under the provisions of 14th Finance Commission.
“As per the 14th Finance Commission, service tax is not shared with states. The earlier you pass the GST, the better it is for states so that they get a share in the Service Tax,” said Jaitley who have long struggled to see it through in the upper house where the ruling NDA lacks numbers.
Asked if the Centre plans to increase the share of states from the current 42 per cent to 50 per cent, the finance minister said: “Till the year 2020, it will be 42 per cent.”
Jaitley also said in totality, the states would get Rs 1,88,000 crore more funds during the last year ever since the 14th Finance Commission was implemented.
“If you total the funds that states got after taking the difference between what they got in 2015-16 when the 14th Finance Commission was implemented and what they got in 2014-15 when 13th Finance Commission was applicable, the states got Rs 1,88,000 crore more during the past year,” he said.
Jaitley also said “the net that every state gets under the 14th Finance Commission is much, much higher than very state got under the 13th Finance Commission.”
He said the Finance Commission fixed the criterion for distribution of funds after talking to states and each Finance Commission set different criteria.
The Centre, he said, also needed resources as some funds over and above 42 per cent are given by it to the states to finance welfare schemes from its share of 58 per cent.
The Finance Minister said the 14th Finance Commission heard out states and on the basis of their financial health, decided the criteria based on the demographic profile, population and income inequality, with a new criteria of forest cover being added this time.
On some schemes where some states have suffered, the Centre had constituted a committee of chief ministers who recommended that some schemes should be fully sponsored by the Centre and some others be adopted by the states, he said, adding that in some schemes, the Centre would support to the extent of 60 per cent and states 40 per cent.
“But each of the states will get more funds in totality after the implementation of Finance Commission,” he said.
Asked about Tamil Nadu, the Minister said “the net amount that the state received from 2015 to 2020 has by itself increased by 122 per cent. There is a significant increase that has taken place. Though in terms of percentage, the allocation there is a slight decline.”