Bhubaneswar, June 2 (IANS) The Odisha government on Thursday opposed the hike in cess and surcharge by the union government, contending that it denied the states their rightful share in the tax devolution.
Since cesses and surcharges fall outside the sharable pool of central taxes, the states would not get any financial benefit, it said.
“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, adding a letter has been written to the central government opposing the decision.
The central government has raised the rate of service tax from the existing level of 14.5 per cent to 15 per cent by imposition of Krishi Kalyan Cess of 0.5 per cent on all taxable services with effect from June 1 this year. Earlier, the rate was raised from 12.36 per cent to 14 per cent with effect from June 1, 2015 which was further increase to 14.5 per cent from November 15, 2015 with imposition of Swachh Bharat Cess of 0.5 per cent.
“Increase in the financial resources of the central government through imposition of cess and surcharge which deprive the states of their rightful share in central taxes goes against the spirit of cooperative federalism through which the states are said to be equal partners with the federal government,” said Amat.
He said the central government by using their taxation powers has imposed cess and surcharge to finance their share of the centrally sponsored schemes while denying the same benefit to the states.
“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,” he added.