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Bengaluru: Chhattisgarh commercial taxes minister T S Singh Deo on Tuesday urged the union finance minister Nirmala Sitharaman to extend the goods and services (GST) tax compensation for the states beyond 30 June in view of revenue challenges faced by mining and manufacturing states under the GST regime. He said, in case it is not extended, the GST sharing formula between states and the Centre should change from 50:50 to 70:30 in favour of states.

In a letter to Sitharaman, Deo, who is down with Covid-19 and therefore could not attend the GST Council meeting in Chandigarh on Tuesday, pitched for another five year of extension of compensation for states.

He said Chhattisgarh, in particular, has suffered 4127 crore notional loss in 2021-22 on 10 items including iron and steel, coal, paddy, and tendu leaves, since these got subsumed in GST compared to the revenue from these items under the value added tax regime.

The revenue from these items in the pre-GST regime stood at 3420 crore, compared to only 634 crore in 2018-19, a year after GST implementation, indicating a notional loss of 2786 crore.

“Unable to attend the GST council meeting being under home isolation since been tested positive for COVID-19. Wrote to Honorable Union Minister of Finance Ms Nirmala Sitharaman with key point agendas on behalf of Chhattisgarh and other mining & manufacturing states, Deo tweeted on Tuesday.

Deo said the provision for 14% protected revenue must be continued for another five years, because particularly, mining and manufacturing states, who are not consumers suffer a great loss of revenue.

He pointed out that if states are not compensated, it will limit their ability to invest in social sector, creation of employment and investment.

“For the above reasons we are presenting the proposal in GST Council to continue with the 14% protected revenue position… if the protected revenue position is not continued then the 50% formula for central GST (CGST) and State GST (SGST) should be changed to SGST 80-70%, and CGST 20-30%," Deo said in the letter.

The states were assured full compensation for any revenue loss arising in the first five years of introduction of GST on the assumed revenue growth rate of 14% on the base year of 2015-16. Compensation cess is levied on luxury and sin items such as aerated drinks, coal, pan masala, cigarettes and automobiles over the peak rate of 28%.

The GST Council in the September meeting last year decided to extend the compensation cess period till March 2026, but the collection will be used “purely to repay the back to back loans taken between 2020-21 and 2021-22" and not to further compensate states, Sitharaman had clarified then.

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