CHENNAI: Strongly protesting the Centre’s move to rush through the Constitutional Amendment Bill on Goods and Services Taxes (GST), Chief Minister O Panneerselvam on Friday urged Prime Minister Narendra Modi to allay fears of the States and evolve a broad consensus on critical issues before attempting the move with far-reaching consequences.
“States with manufacturing bases like Tamil Nadu stand to lose huge revenue if GST is implemented, as GST will be based on the destination principle,” the Chief Minister pointed out.
The Centre should permit the Empowered Committee of State Finance Ministers to try and evolve a broad consensus on the critical issues before the enactment of the Amendment Bill on GST is taken up. Hasty enactment of the Bill is bound to have serious long-term implications for the fiscal autonomy and revenue position of the States, the Chief Minister said in his letter to the Prime Minister. Panneerselvam has categorically said that the current proposal of the Centre to introduce an Amendment Bill on GST and then to evolve a consensus on various aspects, especially the actual tax rates and tax bands through the GST Council is not acceptable to Tamil Nadu.
He recalled that former Chief Minister J Jayalalithaa had consistently been opposing the idea of the GST Council as a constitutional body as it compromises the autonomy of the States, including in fiscal matters. He added that Tamil Nadu was strongly objecting to the decision-making rule and voting weightage which gives the Centre an effective veto in Council and further makes no distinction amongst the States in the weightage.
He reiterated the demand that Petroleum and Petroleum products should be kept outside the purview of GST as it would entail huge revenue loss to the States.
Stating that it was understood that the compensation was proposed to the extent of 100 per cent for the first three years, 75 per cent in the fourth year and 50 per cent in the fifth year, the Chief Minister pointed out that 100 per cent compensation should be provided to the States for five years.
He also observed that considering the State’s past experience with the Centre’s compensation mechanism both for the introduction of VAT and the reduction of Central Sales Tax, it is doubtful whether a fair and workable mechanism could be implemented. “Hence, it is imperative that a consensus be arrived at on the methodology and the period relating to compensation. Further, this should be included in the Constitutional Amendment Bill itself,” the Chief Minister added.