Change in GST law needed for benefit of producer states: TS Singh Deo

livemint.com:

GST) law to give a higher share of revenue to producer states such as Chhattisgarh, a senior legislator from that state said on Friday. Chhattisgarh deputy chief minister T.S. Singh Deo also said the Centre’s share of GST revenue should not be more than 20%.

“The states are getting only 71% of the revenue. The (remaining) 29% that the states were getting during the VAT (value-added tax) regime is going away to the central government, which is completely unfair. What must be corrected is the GST structure that is unfair to producing states and mineral rich-states like ours," he said.

He explained that while 50% of GST revenue goes to states, of the remaining 50% that goes to Centre, 41% is devolved back to states as per the Finance Commission formula. This brings the states’ share of revenue to about 71%. This, he said, was lower than what the states were getting prior to the GST regime when VAT was levied.

“Not more than 20% should be going to the Centre from GST," he added. Finance Commissions make recommendations on sharing of the Centre’s tax revenue with states and also on tax reforms, efficiency in tax administration and in expenditure reforms. At present, the formula that applies till FY26, as recommended by the 15th Finance Commission, prescribes devolution of 41% of the Centre’s net tax revenue to the states.

Among the states, the share is decided by a formula designed to incentivize demographic performance and the state’s effort to mobilize its own tax revenue, besides its geographic area, forest cover and per capita income. Deo added that changes to the GST law have been done before and this demand from producer states should be taken up by the GST Council in the spirit of cooperative federalism. He said state