Hyderabad: Tamil Nadu finance minister P. Thiaga Rajan, popularly known as PTR, said that the Union government’s Goods and Services tax (GST) system is shaky and expressed “strong disapproval” of states losing their fiscal autonomy in a centralized federal system.
“States have very little independence in the matter of taxation and states primarily depend on two sources for their revenue – their revenue and central transfers. Since the implementation of GST, it has reduced the resource-generating capacity of States which is also leading to inter-State inequality. To tide over a few loose ends, data must be used to make decisions,” suggested PTR, while addressing a virtual event on September 29.
PTR, along with Kerala’s finance minister K. N. Balagopal and Karnataka’s industry minister Murugesh R Nirani participated in an online event held by the Federation of Indian Chambers of Commerce and Industry (FICCI), called ‘South India GST Conclave’.
In the virtual event, the ministers from the three south Indian states discussed the GST tax-sharing formula and other major issues. Addressing the conclave, Kerala finance minister K. N. Balagopal appreciated the southern state councils of FICCI for organizing a conclave on such a “need-of-the-hour subject”. He affirmed what PTR stated and said Kerala’s tax collection used to be 14 to 16% before the GST, but it has reached stagnation now due to COVID-19 and “inherent structural defects of the system”.
Echoing his remarks, Balagopal recalled how he had moved a dissent note as a Member of Rajya Sabha in a parliamentary panel, stating the GST is very much against the principles of federalism. “The revenue share of Kerala was reduced from 16% to 11.3%, adding to its woes. It has become a very serious situation,” Balagopal said.
In his closing remarks, the Kerala finance minister said “one country, one tax” is not at all ideal. “Neither the world’s most powerful country, the United States, nor the world’s largest country China follow this system of taxation,” he pointed out.
However, unlike the other two ministers, Murugesh R Nirani, the industry minister of Karnataka expressed his overall satisfaction with the GST system. He thanked Prime Minister of India Narendra Modi and others for major tax reforms. “GST enabled scientific assessment of tax and helped more tax compliance. The states have seen an increase in revenues. However, there are few issues still to be resolved,” Murugesh added.
It may be noted that in south India, Karnataka is the only Bharatiya Janata Party (BJP) ruled state. Tamil Nadu is run by the Dravida Munnetra Kazagham (DM), Kerala by the Communist Party of India (Marxist)-led Left Democratic Alliance, and Telangana by the Telangana Rashtra Samithi. On Thursday, Telangana finance minister T. Harish Rao could not attend the conclave as he was busy in a state Assembly meeting.
Before the ministers spoke, T. Muralidharan, FICCI Telangana chairman, explained that the event was the first-ever conclave on the subject concerning all the stakeholders. “That is why we brought all of them on a single platform. The conclave is being organized in the context of testing times. Southern states are the biggest losers in the new tax-sharing formula,” he added.