Terming the continuous increase in cesses and surcharges as “antithetical” to the spirit of fiscal federalism, Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan on Friday made a fervent appeal to the Union government to merge them into basic rates of tax to ensure states receive their “legitimate share” in devolution.

In his speech at the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi, Thiaga Rajan said cesses and surcharges, which do not form a part of the divisible pool of taxes, have adversely affected the transfer of resources to the states. “Cesses and surcharges, as a percentage of gross tax revenue, have increased manifold from 10.4% in 2011-12 to 26.7% in 2021-22. This has deprived the states of their legitimate share of revenue collected by the Union government,” he said, demanding that they be merged into basic rates of tax.

Flagging that the state’s fiscal autonomy has further been curtailed by the increasing ratio of grants-in-aid to share in central taxes, he said the ratio of grants-in-aid to share in central taxes has increased from 45% in 2012-13 to 94% in 2021-22 for Tamil Nadu.