The GST has Hurt the Finances of State: Kerala, TN Finance Ministers

KOCHI:
The states have suffered considerable loss of autonomy in matters of taxation after the introduction of GST, said finance ministers of Kerala and Tamilnadu. The ministers were addressing South India Finance Minister’s GST Conclave organized by Federation of Indian Chambers of Commerce and Industry (FICCI).

GST has hurt the finances of Kerala, said Finance Minister K. N. Balagopal. ‘Kerala had an income growth of 14 to 16 per cent prior to GST and the first two years of GST implementation saw a stagnation of income growth and this was followed by a negative growth due to the pandemic,” he said. Taking up the case of petroleum products, Balagopal said the state government collects Rs 17 on a litre of diesel while the Centre takes away Rs 31 and a good portion of the Centre’s incomes comes through cesses. He underscored the need for businesses and government to work together for a strong economy.

The direct taxation has been with the Centre and the states had some autonomy on the indirect tax front earlier. With GST, half of this autonomy has gone,” said P.T.R. Palanivel Thiagarajan, finance minister of Tamil Nadu. The States’ fears of losing autonomy with the Goods and Services Tax regime have come true, he added. The States have now very little independence in any matters of taxation now,” he said, stressing on how many problems can be resolved to the satisfaction of the States and industry if the GST decisions are data-driven. “The ratio of direct and indirect taxes too has changed as the cess portion, which goes into the indivisible pool, has moved up. This has affected the state finances,” he added at the virtual event . According to Thiagarajan, India is the only country where so much power on taxation rests with the Centre. In countries like the US and China, both direct and indirect taxes are divided at the state, district and county-levels.

Karnataka industries Minister Murugesh Nirani said the GST collections in the past few months have been improving as the economy is coming out of the pandemic. GST has helped interstate movement of goods. There are issues in the system, but they can be fixed, he said. . He thanked the Prime Minister, the Union Finance Minister and members of the GST Council for ushering in the major tax reform.

Chairman of FICCI Task Force on GST Sachin Menon, FICCI Telangana Chairman T. Muralidharan, FICCI Karnataka Chairman K. Ullas Kamath, FICCI Kerala State Council Co- Chair Deepak Aswani, FICCI Tamilnadu chair Dr. G S Velu, FICCI Telangana Co-chair Murali Krishna Reddy, FICCI Secretary general Dilip Chenoy, Shamam Legal Founder & Senior partner Mukul Gupta addressed the Conclave.