Stop Area-based Tax Sops: Jayalalithaa

Such concessions for Andhra and Telangana would adversely affect neighbouring states like TN, Modi told.

Published: 26th August 2014 06:00 AM  |   Last Updated: 26th August 2014 12:50 PM   |  A+A-


CHENNAI: Chief Minister J Jayalalithaa on Monday urged Prime Minister Narendra Modi to adopt a cautious approach on offering area-based tax concessions to Andhra Pradesh and Telangana in the name of encouraging economic development, as it could affect states like Tamil Nadu.

Pointing out that while Tamil Nadu did not grudge the benefits that were sought to be conferred on Andhra Pradesh and Telangana for their development, Jayalalithaa, in her letter to PM Modi said she was expressing her apprehensions and reservations of Tamil Nadu as there were demands from certain quarters that area-based tax concessions should be provided to the two successor states.

Referring to the reports that the Centre has made an additional term of reference to the 14th Finance Commission for making recommendations on the resources that would be available to the successor states on the reorganisation of AP, Jayalalithaa said, “If area based tax concessions are offered to the two States, it will cause a huge flight of capital and relocation of industries, in particular from neighbouring States. It would also make the neighbouring States totally uncompetitive.”

Recalling that the AP State Re-organization Act, 2014, already contains a substantial and significant economic package, the CM said: “Nothing should be done which would distort economic incentives or a level playing field and render States like Tamil Nadu uncompetitive vis-a-vis their neighbours. It would be highly ill-advised to offer across the board area based tax concessions.”

Stating that the tax incentives like area-based concessions were the making of the previous UPA regime, Jayalalithaa said the present government must exercise the greatest care in approaching this issue.

Observing that area-based exemptions were very expensive, Jayalalithaa said  the Statement of Revenue Foregone presented to Parliament in July, 2014, indicated that the total revenue foregone through such area-based tax concessions during 2013-14 was Rs 9,267.50 crore in direct taxes and almost Rs 18,000 crore in excise duty.  She also pointed out that when new states were carved out earlier, they did not receive any such incentive.

In the case of Uttarakhand, a hill State with issues of difficult terrain and remoteness, which was already categorized as a special category state on par with the North Eastern States, J&K and Sikkim. “A similar categorisation cannot be made in the case of either AP or Telangana,” she added.

The CM observed that a very limited, time bound exemption might be justified to enable an area to recover from a natural disaster. “However, when I made a similar request on 6th June, 2005, for a limited excise duty holiday for the areas affected by tsunami in TN in 2004, no such concession was given by the then UPA government,” she said.


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