JOIN USA day after states complained about the limits on their freedom to raise resources, Finance Minister Arun Jaitley on Monday sought to make it clear that the state governments collect 50% from the Goods & Services Tax (GST).
Besides, he also gave a detailed account of how much the states earn through levies on petroleum products and central share of taxes.
Jaitley said states levy taxes on petroleum products which are independent of other taxes. States also charge ad valorem on oil, therefore if oil prices go up states tend to earn more. Over and above, states charge local taxes, too, on goods.
"As much as 42% of the central government taxes are shared with the states. State governments collect their 50% from GST besides their local taxes. These are independent of taxes on petroleum products. The states charge ad valorem on oil. If oil prices go up, states earn more," Jaitley said in a blog.
His write-up came after states like Tamil Nadu, Kerala, Andhra Pradesh, West Bengal, Punjab and others complained about a constraint in their finances after the launch of GST in July last year and also sought a change in the terms of reference of the 15th Finance Commission which appeared to hit them hard.
In a meeting of Niti Aayog's Governing Council chaired by Prime Minister Narendra Modi on Sunday, states like Tamil Nadu had also suggested a new model of resource sharing in which levy and appropriation of all indirect taxes can be given to states and the Union government can retain the direct tax revenues.
This, they said will help overcome the limitations in mobilising funds in the post-GST era.
In a veiled reference, Jaitley also asked states to give relief to consumers through their extra earnings due to the abnormal increase in crude oil prices.
"Relief to consumers can only be given by a fiscally responsible and a financially sound central government, and the states which are earning extra due to the abnormal increase in oil prices," Jaitley added.