Impact likely to be ₹5,500 crore

The State apparently has little to cheer about in the latest cut in the Goods and Services Tax (GST) on 17 items and six services announced by the GST Council on Saturday.

The total financial impact of the reduction of the GST is likely to be around ₹5,500 crore and the State is likely to be benefited to the tune of 2.5% of the quantum, pegged at around ₹150 crore. Senior officials said though most of the issues raised by the State during the GST council meetings were resolved till date, clarity is yet to emerge on certain issues like GST on the government owned buildings and the repayment of minimum guaranteed amount excluding the assured refunds of taxes collected.

“The minimum guaranteed amount for the State has been fixed at ₹1,989 crore, excluding the regular refunds. But the assurance is not being followed. If implemented, the State will get an additional ₹600 crore on this count,” a senior official told The Hindu.

Another area that was yet to be clearly defined was the tax on the government buildings being used for commercial purposes pegged at 18%. “There is confusion over payment of 18% for government buildings. This is because the definition of commercial purposes has not been made clear — leading to confusion over the payment,” the official said. The State has been asking for the data relating to the IGST (Integrated GST) settlement as it is becoming difficult to calculate the tax rates for invoices generated in other States in the absence of the data.

Coupled with this is the unmet demand for reduction of GST on cement which is pegged at 28%. Cement industry was facing much higher tax till recently as the burden was around 33%, including the Central excise and value added tax, but the burden had been brought down to 28% after merging the two taxes with the GST. “There is a lot of implication in the reduction of the tax on cement. The industry can see an increase of ₹45,000 crore if the tax is reduced to a reasonable level,” the official said. Officials are hopeful that the Centre would announce further cuts on some key items in the coming days in the run up to the elections.

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