PTR slams Centre’s regressive tax policy, demands Rs 16,725 crore GST due

Draws FinMin’s attention to the growing gap between revenue realised and guaranteed 
Tamil Nadu finance minister PTR Palanivel Thiagarajan. (Photo | P Jawahar, EPS)
Tamil Nadu finance minister PTR Palanivel Thiagarajan. (Photo | P Jawahar, EPS)

CHENNAI: Finance Minister Palanivel Thiaga Rajan on Thursday urged the Centre to immediately release Rs 16,725 crore GST due to the State, including compensation for the current financial year. 

Listing a slew of demands on behalf of the State at the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi on Thursday for being included in Union Budget 2022-23, the minister said the GST compensation for shortfall in tax collection should be extended by at least two years beyond June 2022 as States may face huge revenue shortfall due to the Covid-19 pandemic.

“Over the last five years, there has been a huge gap between the revenue realised and the revenue guaranteed and the gap has been widening,” he said, underscoring the fact that Tamil Nadu accepted to forego its taxation rights during the introduction of GST based on the assurance given by the Centre to protect its revenue.

Referring to the dues pending from the Centre, he said, “For schemes shared between Centre and States, approximately Rs 17,000 crore has to be released. Performance grant of Rs 2,029.22 crore from 2017-18 to 2019-20 and basic grant of Rs 548.76 crore for 2019-20 under the 14th Finance Commission are also pending.”

Rajan said these dues have a considerable impact on the fiscal position of the State which is already under severe stress. The dues should be released at the earliest and appropriate allocation must be made in Budget 2022-23, he said. Quoting the CAG Report of 2016, Rajan said the Centre had not devolved Rs 81,647.70 crore between 1996-97 and 2014-15 to States. “This translates to Rs 4,500 crore due for TN and the Centre must release this in 2022-23,” he said.

He reiterated the demand to merge cess and surcharges with basic tax rates and wanted GST hike for textile and apparels to be rolled back from 12 per cent to 5 per cent. Rajan also sought the Centre’s intervention to control the rising prices of goods and raw materials such as steel, copper, aluminum, and cotton through modification in import duties.

Pointing out that the Centre’s share of revenue from indirect taxes has surpassed the revenue from direct taxes in 2020-21, the Minister said, “This is highly inequitable, as indirect taxes are regressive by their nature, and disproportionately affect the poor. The Centre must maintain a 60:40 ratio between direct and indirect taxes.”

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