Merge cess, surcharges into basic tax, says PTR

Times of India, Trichy/ Madurai

Friday, December 31,2021

'States lost ₹1.5L Crore Revenue in 2021-22'

Times News Network

Chennai: Tamil Nadu minister for finance and human resources Palanivel Thyagarajan as called upon the centre to merge all the ' cesses and surcharges' into the basic rate of taxes, so that the states or not deprived of their rightful share of tax revenues. After the centre more than tripled the 'cesses and surcharges' To 19.9 in 2010-11, the states where deprived of ₹1.5 lakh crore as their divisible share of revenues in 2021-22, he said. 

The increased levy of cesses and surcharges, which do not form part of the divisible pool of taxes, has adversely affected the transfer of resources to the states. The states are deprived of a share of approximately 20% of the revenue collected by the union government,  Thiaga Rajan said, while urging the centre to release the pending ₹16, 725 crore due to Tamilnadu and extend the period of offering GST compensation to States by two years from end of June 2022.

Addressing the pre budget meeting chaired by the Union Finance Minister Nirmala sitharaman and attended by all state finance ministers in New Delhi on Thursday, Thiaga Rajan said due to the Re alignment of taxes by the centre, the ratio of grants-in-aid to share in Central taxes has increased from 62.67% in financial year 2010-11 to 130.7% in 2020-21.

while the share in taxes is legitimate right and provides the state the autonomy to cater to the local needs and aspirations, the grant-in-aid is discretionary and tied funds. This greatly impinges the federal structure enshrined in the constitution,  he said, while urging the centre to merge the cesses and surcharges. 

In recent years, the share of revenue collected from indirect taxes in the gross tax revenue of the centre has increased sharply and has surpassed the collections from direct taxes in 2020-21. Since indirect taxes are regressive by nature, they disproportionately affect the poor and urged the central to maintain a 60:40 ratio between direct and indirect taxes. 

The increased level of cesses and surcharges has adversely affected transfer of resources to the states. The states are deprived of a share of approximately 20 % of the revenue collected by the centre. Palanivel Thiaga Rajan - Finance minister.

 

Media: Times of India