Himachal Pradesh Invokes Kyoto Protocol to Demand GST Compensation
Date: December 23, 2024
Category: GST Recent News
Read Time: 4 Minutes
The Himachal Pradesh government has urged the Centre to introduce compensation mechanisms for revenue losses caused by GST implementation. It invoked principles similar to the Kyoto Protocol to justify the demand.
Key Highlights
1. Drawing Parallels to the Kyoto Protocol
Himachal Pradesh’s Technical Education Minister, Rajesh Dharmani, referenced the Kyoto Protocol, which incentivizes developing nations for adopting eco-friendly measures. Similarly, he argued that hilly states should receive compensation for implementing revenue-disruptive policies like GST.
2. Request for GST Compensation
The minister called on the GST Council to devise alternative compensation mechanisms. He emphasized that states like Himachal Pradesh, which relied heavily on local taxes before GST, now face significant revenue challenges.
3. Concerns Over Demand Notices
Mr. Dharmani highlighted the ₹200 crore demand notices issued by CGST authorities to toll lessees in Himachal Pradesh. He demanded these notices be annulled and sought clarification on their legal standing.
4. Key GST Exemption Demands
The state proposed the following GST exemptions:
- Individual health and term insurance policies, especially for women, children, and senior citizens.
- Research and development expenses for public and private entrepreneurs, with a suggested waiver period of 10–15 years.
5. Proposals for Infrastructure and Agriculture
Himachal Pradesh also urged the Centre to:
- Create satellite towns by amending the Forest Conservation Act to allow forest land diversion.
- Allocate funds for sewage treatment facilities in rural areas.
- Increase customs duty on apple imports from 50% to 100%, safeguarding local apple growers.
Context
The GST Council’s 55th meeting, chaired by Union Finance Minister Nirmala Sitharaman, was recently held in Jaisalmer, Rajasthan. Himachal Pradesh’s demands spotlight the challenges faced by states with unique geographical and economic vulnerabilities, emphasizing the need for customized fiscal policies.
The invocation of Kyoto Protocol principles aligns with global practices. These practices compensate regions for adopting measures that benefit the larger system while impacting local revenues or development.
Broader Implications
This call for compensation raises critical questions about federal fiscal policies and their effect on states with diverse economic profiles. Tailored solutions could ensure a fair and balanced GST framework, addressing the needs of all stakeholders effectively.
