GST will not hit states' revenues: Jaitley

05 May 2015

The implementation of the goods and services tax (GST) will not hit revenues of the states in the long run as tax GST rates will be closely aligned to the revenue neutral rates (RNR) of the centre and the states, finance minister Arun Jaitley said today.

RNR is the rate at which there will be no revenue loss to the states after GST implementation. The RNR for GST is under consideration and a final view on this would be taken by the GST Council, finance minister Arun Jaitley informed the Rajya Sabha.

"As tax rates during GST regime will be closely aligned to the revenue neutral rates (RNR) of the Centre and the States, revenues of the central and state governments will not be impacted in the long run," he stated in a written reply to a question in the House.

To help states in the transition phase, the Constitution (122nd Amendment) Bill, 2014, which was introduced in the Lok Sabha in December last year for amending the Constitution to facilitate introduction of GST in the country provides for the levy of an additional tax on goods, not exceeding one per cent in the course of inter-state trade or commerce, to be collected by the Government of India for a period of two years, and assigned to the states from where the supply originates.

The bill provides for compensation to the states for loss of revenue arising on account of implementation of the GST for a period which may extend to five years, Jaitley said.

Besides, in the case of petroleum and petroleum products, the bill makes it clear that these goods will not be subject to the levy of GST till a date notified on the recommendation of the Goods and Service Tax Council.

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