Bihar Deputy Chief Minister and State Finance Minister Sushil Kumar Modi has urged the UPA Government to reconsider its decision to amend the Income Tax Act as it will amount to infringement of the autonomy of the State Governments if the amendment is made.
The proposed amendment, under Clause 7 of the Finance Bill 2013, seeks to disallow levies being imposed by State Governments on PSUs for the purpose of imposition and computation of income tax by amending Section 40 of I-T Act.
In a letter to Union Finance Minister P Chidambaram, Sushil Modi said that the proposed amendment amounts to imposition of tax on State Governments’ income and also violates Article 289 of the Constitution.
The proposed amendment would also give wide discretionary powers in this regard. Observing that the State Governments are competent to impose levies on its PSUs, Modi said that the State Government receives “Privilege Fee” from Bihar Beverage Corporation limited and its other PSUs, adding that the Privilege Fees are important component of the State’s income.
On the account of payment of Privilege Fees to the State Government, these PSUs get rebate in the Income Tax.
But if the amendments are made in the Income Tax Act, the income being generated from the collection of Privilege Fees will be adversely affected.
The Deputy Chief Minister said that the Centre has not proposed any such amendments for the PSUs under its domain. He said that the States are already agitated by some of the “actions or inactions” of the Central Government on the issue of compensation for introduction of VAT.
“The proposed move to amend the Income Tax Act will further erode the confidence of the State Governments and delay of Goods and Services Tax (GST), he added.