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Tamil Nadu Finance Minister requests Centre to extend GST compensation period by 2 years

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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 realised and the guaranteed revenue protected by the Act. The Covid pandemic further exacerbated the problem and the State’s revenue 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,” according to a copy of his speech made at a pre-budget consultation conducted by the Union Finance Minister Nirmala Sitharaman in New Delhi.

Cesses and 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 per cent in 2011-12 to 26.7 per cent 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 homogenisation 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 offer discretion to the State government in the utilisation 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 per cent in 2012-13 to 94 per cent in 2021-22 for Tamil Nadu,” he added.

Centrally sponsored schemes

Explaining that the unit costs and the Government of India’s share of the cost in many centrally sponsored schemes do not align with the ground realities, he urged Government of India to enhance the unit costs to reflect the present-day requirements and increase its proportion in centrally sponsored schemes.

Seeking adequate fund allocation for railway projects in Tamil Nadu, which has seen continuous neglect in the past, the State Finance Minister requested the Union government to accord sanctions for a few railway projects in the State.

He also urged the Union government to extend the Production Linked Incentive (PLI) scheme for the leather and non-leather footwear sector and Green hydrogen and electrolyser manufacturers.



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