Even as the ruling Samajwadi Party has supported the Goods and Services Tax Bill, the corridors of power is abuzz with fear of UP losing huge revenue inthe process. The reason - half of the traders who pay VAT would walk out of the tax net once the GST regime becomes operational – probably from April 1 next year.
On Thursday, a senior official told ‘The Pioneer’ that though UP is estimated to get Rs 65,000 crore from the Union government as per projection by the RBI under Study of State Finances, the loss will be much more than the gain.
“One thing I can say that UP will not gain financially because what the state will get from Centre after GST becomes operational is practically the same amount it gets annually as Central taxes. But the GST will help in making tax recovery and monitoring more transparent. It will be less cumbersome for the consumers as well as traders,” the official said preferring anonymity.
The officials in Finance and Commercial Tax departments were busy the entire day calculating the gains and losses for UP, post GST. Sources said that the CM’s secretariat too has asked the Finance Secretary to prepare a `note’ with `flow chart’ explaining where exactly UP stands after implementation of the GST.
“This GST is not a headache for the present government but the onus of implementing it would be on the next government. We can see a change in tax structure in the next government. I believe the government might go in for some local taxes to hike its revenue,” the official said.
As per estimation, UP’s total tax revenue after GST would be Rs 1,57,502 crore of which state’s share would be Rs 47,500 crore as Sales Tax, Rs 14,500 crore as State Excise and Rs 3950 crore as taxes on vehicles. The share from Central Tax would be Rs 25,493 crore as Corporation Tax, Rs 18160 crore as Income Tax and Rs 13,380 crore as Service Tax among others.
The revenue subsumed to the state under GST would be Rs 65,144 crore. This includes Rs 34,764 crore as Sales Tax, Rs 540 crore as Entertainment Tax, Rs 8844 crore as Customs, Rs 7615 as Union Excise duties and Rs Rs 13,380 crore as Service Tax.
The official said that this was an estimate and the real figure might vary a little. “But more or less picture would remain the same. We have a problem in our hand as UP is set to lose precious revenue,” he said
The highest concern of officials is on losing around 3 lakh traders after GST is implemented as registered trader-population ratio in UP is 3.5 dealers per 1000 population - which is the lowest.
Under the new tax regime, a trader with annual turnover of less than Rs 5 lakh will not be a registered tax payer. Thus, the expected loss of revenue for state would be around 12 per cent of the total tax income.
Meanwhile, leader of BJP legislature party Suresh Khanna said that the passing of GST Bill in Rajya Sabha was a great victory for Prime Minister Narendra Modi. “There were efforts for over a decade to implement the GST but the then government failed to do so. The NDA will implement new tax reforms in letter and spirit which will bolster economic reforms,” he said in a statement issued in lucknow on Thursday.