In an attempt to promote India’s transition to a goods and services tax (GST) system, the 13th Finance Commission is open to compensating states fretful that the move would lead to a decline in their revenue.
Accommodating: Vijay Kelkar. Shabaz Khan / PTI
The commission, a statutory body appointed to recommend the proportion in which tax revenues are to be shared between the Centre and the states, “is willing to consider providing for compensation in order to advance the implementation of a ‘flawless’ GST”, chairman Vijay Kelkar said on Monday. The introduction of GST is expected to boost India’s gross domestic product by 1.4% annually, or about Rs73,000 crore, Kelkar said in a written copy of his speech to industry body Associated Chambers of Commerce and Industry of India, or Assocham.
The previous government proposed introducing GST from 1 April in an attempt to integrate the states into one common market and reduce costs for businesses that are now taxed at least once when they source supplies from outside the state where they are situated.
Kelkar also suggested that housing, construction and railways be included in the proposed GST to increase the tax base and enhance collections.
“I would urge that the construction and housing sectors be included in the GST base, either immediately or during a subsequent phase,” Kelkar said.
The construction sector is a significant contributor to the economy and housing expenditure dominates personal consumption so the two sectors would increase the tax base, he added.
(A Mint staff writer contributed to this story.)