The Tamil Nadu Minister for Finance and Human Resources Management, Palanivel Thiaga Rajan, has made a plea, among other requests, to the Union government to extend the GST compensation period by at least two years and release the dues of more than ₹11,000 crore immediately, as the State is still recovering from the impact of the pandemic.

Post the introduction of GST, there has been a wide gap between the actual revenue realized and the guaranteed revenue protected by the Act. The Covid pandemic further exacerbated the problem, and the State’s revenues are yet to recover fully.

“Considering the revenue shortfall that is expected, I urge the Union government to release the pending compensation dues of ₹11,185.82 crore at the earliest, which is pending due to certain procedural formalities. I also request that the GST compensation period be extended by at least two more years,” he said, according to a copy of his speech made at a pre-budget consultation conducted by Union Finance Minister Nirmala Sitharaman in New Delhi.

CESSES, SURCHARGES

Terming the Union government’s practice of continuously increasing the levy of cesses and surcharges as antithetical to the spirit of fiscal federalism, he urged the Centre to merge the cesses and surcharges into the basic rates of tax so that the States receive their legitimate share in devolution.

“The 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 percent in 2011-12 to 26.7 percent in 2021-22. This has deprived the States of their legitimate share of revenue collected by the Union government,” he stated. Thiaga Rajan also urged the Union government to provide greater untied funding to the States, rather than a one-size-fits-all homogenization through increasingly detailed central schemes. “The State’s fiscal autonomy has further been curtailed by the increasing ratio of grants-in-aid to share in Central Taxes. While the share in Central Taxes offers discretion to the State government in the utilization of funds, the funds received as grants-in-aid are tied and conditional. The ratio of grants-in-aid to share in Central Taxes has increased from 45 percent in 2012-13 to 94 percent in 2021-22 for Tamil Nadu,” he added.