CHENNAI: Tamil Nadu Finance Minister Thangam Thennarasu on Wednesday urged the centre to raise the net borrowing ceiling of states to 4% of Gross State Domestic Product (GSDP) without any conditions. He also demanded an extension of the GST compensation cess to offset revenue loss that may arise from the rationalisation of GST rates. The demands were made during a meeting of the Group of Ministers on restructuring of GST rates held in New Delhi.
Pointing out that reducing GST rates while simultaneously withdrawing the compensation cess would severely impact the states’ revenues, Thennarasu said, “The compensation cess should be extended. If it is not possible to continue the cess on the goods taxed now, alternative mechanisms should be put in place to reduce the revenue loss to the states.”
He further said the cess must be used exclusively to compensate states for revenue loss for a period of four to six years. As an immediate step, he added, the net borrowing ceiling of states should be raised to 4% without putting forth any conditions. While welcoming the move to rationalise GST rates, the minister stressed that the process should ensure that the states’ revenues are protected.