BHUBANESWAR: The Odisha Government on Thursday protested against the Central Government move to hike cess and surcharge.
The Odisha Govt. claimed that the move denied the states their rightful share in the tax devolution.
Notably, the Government of India has raised the rate of Service Tax from 14.5% to 15% with effect from 1st June 2016. New tax imposes Krishi Kalyan Cess @ 0.5%.
“This denies the states their rightful share in the tax devolution. Although, successive Finance Commissions have recommended to review the position and reduce the share of cess and surcharge of gross tax revenue, it has not materialised so far,” said Finance Minister Pradip Kumar Amat.
He said the Central Government’s move went against the spirit of cooperative federalism. The states were equal partners with the Federal Government in the increase in tax benefits.
“The Central Government by using their taxation powers have imposed cess and surcharge to finance their share of the Centrally Sponsored Schemes while denying the same benefit to the States,” said Amat.
He said, “At the same time, they have also increased the State share of the Centrally Sponsored Schemes. It is iniquitous. Had it been an increase in the rate of Service Tax the states would have been benefited by way of their share in the Central Taxes.”
Earlier, the rate of Service Tax was raised from 12.36% to 14% on 1st June 2015. It was further increased to 14.5% from 15th November 2015 on the imposition of Swachh Bharat Cess @ 0.5%.
Thus, within less than a year, Government of India has imposed cess @ 1% on Service Tax.
The share of cess and surcharge in gross tax revenue of the Union Government increased from 7.53% in 2000-01 to 13.14% in 2013-14.