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States suffer as GST regime sans federal spirit, say Tamil Nadu, Kerala

The Goods and Services Tax regime is against India’s federal structure and states have very little say on the decision as against some of the advanced countries such as USA, Palanivel Thiagarajan and K N Balagopal, Finance Ministers of Tamil Nadu and Kerala respectively said on Wednesday.

States suffer as GST regime sans federal spirit, say Tamil Nadu, Kerala
State Finance Minister Palanivel Thiaga Rajan (File Photo)


Blaming the Center for collecting indirect taxes in the name of cess and not sharing it with the states, Thiagarajan said the ratio of cess as of the total taxation has gone up 110 per cent to 124 per cent in recent times. ''For somebody who came into politics about five years ago, it strikes me fast as to how shaky the system (GST regime) is for something that is supposed to serve a country of billion and almost 400 million people... 

You put all of the pieces together, one thing that is very clear to me is the fear of loss of autonomy ( of states) has been fully realized,'' the Tamil Nadu minister said in South India GST Conclave - an online interaction with the Ministers of Southern States, organised by FICCI. 

He said he had already voiced his concerns on how the states are losing ''flexibility or freedom'' on taxation issues. 

According to him, GST was not designed to tackle systemic risks or pandemic type issues. 

The Kerala Minister said that prior to the GST regime, his state had an income growth of 14 to 16 per cent every year. After the introduction of the new tax system, there was stagnation in the initial two years and then there was a negative growth due to the pandemic situation. 

He said he and CPI leader D Raja vehemently opposed the introduction of GST in the country and made a dissent note in the Parliamentary Committee concerned. 

''The GST is very much against the principles of federalism. I said (then) that true federalism will be (negatively) affected up after the introduction of the GST,'' Balagopal said. 

Stating that Kerala is collecting less tax on Diesel as against the Centre, the minister said the Union Government is collecting Rs 31 on diesel in the name of Cess, which is not being shared with states through devolution of funds. 

Murugesh Nirani, Karnataka Minister for Industries said though there is a long way to go in the implementation of GST, the system was introduced as part of One Country-One Tax model being adopted by the NDA Government.

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