Is 'One Nation One Tax' a farce? States find other ways to tax people despite GST

Post-GST rollout states like Maharashtra are now mulling introduction of additional 2 percent tax on property

The BJP government in the Centre claimed that under GST regime, all taxes were equal but as it turns out some seem to be more equal. The Goods and Services Tax was aimed that unifying the country on the taxation front. In a bid to offset revenue losses to local bodies with the rollout of GST, States have found new ways to pass on the burden to the common man.

Fresh fruits and vegetables are not taxed under the GST but the Centre has given States the power to impose taxes on wholesale markets. Any increase in price trickles straight down to the consumer. While Goods and Services Tax pushes for unified taxation policy, States like Maharashtra and Tamil Nadu have taken the additional taxation route to offset losses.

"The State governments, especially those that collected taxes at local body level will suffer losses due to GST. The GST nullifies all other local taxes and the revenue loss is huge. The States have to offset this loss somewhere and hence, have been given breathing space in the form of permission to levy additional tax above GST slabs on stamp duty, vehicle registration and entertainment taxes, limited to cinema," said E Narasimhan, a financial consultant.

The Maharashtra government, however, maintained that there was no additional burden on people. "It is a misconception that States are imposing additional taxes. When GST came into effect, the cost of products like vehicles came down. As product prices fell, so did the taxes on them. But the fall in taxes means lesser revenue for the state. We are only trying to balance out this difference in tax rates. Only when the government gets taxes can we work for the people's welfare," said Maharashtra Finance Minister, Sudhir Mungantiwar.

He also added that the States were not under the compulsion to levy an additional tax on people since the government was also compensating for the loss of revenue. The Bruhanmumbai Municipal Corporation received its first cheque of Rs 650 crore as an offset for revenue losses owing to GST. The BMC has pegged losses due to GST at Rs 7,000 crore.

States look to shift burden of revenue loss

Earlier this week the Maharashtra cabinet decided to increase vehicle registration fees by 2 percent. This effectively means that the hike is above the GST slab for two-wheelers and four-wheelers. Taxes on two-wheelers in Maharashtra before the GST rollout was 8 to 10 percent and has been now increased to 10 to 12 per cent. With an increased 9 percent tax, people buying new CNG/LPG cars will have to shell out as much money in tax as Petrol car buyers used to in the state.

The government now wants to hike stamp duty by 2 percent. To offset the losses it is incurring with the abolition of local body taxes and octroi, the government is finding new ways to collect additional taxes from the citizens. The state first hiked the tax on vehicle registration and is now mulling similar move for stamp duty and property tax.

Maharashtra is estimated to lose Rs 600-700 crore annually under the GST regime since its Local Body Taxes and octroi will be abolished. The Tamil Nadu government is unwilling to let go of its state imposed 30 percent tax on cinema tickets despite the GST looking to regularise it under a uniformed tax regime.

Offset of GST loss is not good news for consumers

While Maharashtra took the vehicle registration route, Tamil Nadu exploited the entertainment tax route. With GST of 28 percent for tickets costing more than Rs 100 and the state-levied tax of 30 percent, total tax on one single movie ticket in Tamil Nadu is 58 percent. More than half of the cost of the product. "Loot is what I can call it. Why the farce of a GST when it is clear that the government does not intend to have the entire nation under one tax regime? I am ending up paying at least Rs 20 more for a same-class ticket than people in my neighbouring states," said Vinay Kumar, an avid movie watcher from Chennai.

After protests by cinema theatres owners, film fraternity and closure of theatres, the government of Tamil Nadu agreed to set up a committee to study the municipal tax levied in addition to the GST. Even if the introduction of GST brought some hope of minor decrease in prices of goods and services, additional taxation above GST slab by state government threatens to turn the tax regime anti-consumer.

If states were to be allowed to levy additional taxes above and beyond GST, what was the point of a new, unifying tax regime? Who is to stop other states from following in the steps of Maharashtra and Tamil Nadu and levy additional taxes on the people?

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