Finance Minister Vajubhai Vala told reporters here today that Gujarat had been incurring a loss of about Rs 500 crore a year because of this Central benefit to these union territories.

Besides, he said, it had encouraged Gujarat traders to indulge in ``bogus billing'' to evade sales tax. He demanded that Centre should extend tax exemption to industries in the union territories only at the production stage.

Vala said Gujarat should get four per cent of sales tax on the lines of the Central sales tax (CST) on the finished goods going out of the State. If this is ignored, a large number of industrial units in Gujarat would face closure, he cautioned.

To a question, he said the talk of a merger of the Diu, Daman and Dadra Nagar Haveli union territories with Gujarat was a ``policy matter'' that could be considered at the party or the government-level. When asked, he said the negotiations on the proposed octroi abolition in the State were continuing with chambers of commerce and industries and local self-government bodies.

Apparently referring to the Congress charge that the State Government had failed to get financial assistance for victims of the Kandla cyclone and the Surat floods, the finance minister said: ``we still hope to receive the assistance to meet the expenditure in these areas". He, however, did not specify when and how much the State would get from the Centre.