93
Internal Customs Duties
192. The only States which now levy such duties are Hyderabad, Rajasthan, Madhya Bharat, Saurashtra and Vindhya Pradesh.
In regard to the first three, the Committee recommended varying periods, of three to five years, for the abolition of these duties and for their substitution by sales tax. In subsequent discussion with the representatives of these States, it was agreed that the period required would have to be 4 years in the case of Hyderabad and 5 years in Madhya Bharat and Rajasthan. These duties could doubtless be abolished even earlier, if the Centre could give some direct financial assistance; but present conditions render such a solution impracticable.
The Committee recommended the abolition of internal customs duties in Saurashtra and Vindhya Pradesh on 1st April 1950, and the grant of some small direct financial assistance to them by the Centre in that connection. Vindhya Pradesh agreed, but Saurashtra preferred gradual assistance; but present conditions render such a solution impracticable.
In no case will any "compensation" as such be payable.
Income-tax
193. The Committee's recommendations concerning the introduction of Income-tax in 1950-51 in Madhya Bharat, Rajasthan and Vindhya Pradesh at the rates now in force in Saurashtra, and the gradual raising of all State rates to the Indian level over a period of two or six years depending upon their present level of rates have been accepted by all States. In the case of PEPSU and Travancore-Cochin it was further agreed that full Indian rates may be introduced from 1950-51 itself.
As regards division of Income-tax it has been agreed that no State could participate in the all-India "Pool" until two years after the full level of Indian taxation had been reached; meanwhile, there would have to be some ad hoc arrangement for each State e.g. that each State should get 50 per cent. of the divisible Income-tax collected within such State.
In the case of Mysore, Hyderabad, and Travancore-Cochin whose last financial years ended on 30th June, 30th September and 16th August 1949, respectively, special agreed arrangements have been concluded enabling them to get the due proportion of their Income-tax revenue in respect
