GST share goes ‘South’

Thiagarajan, Balagopal, Nirani, & Muralidharan, Reddy

GST share goes ‘South’

Non-BJP States talk of ‘anti-federal’ tax structure

The Southern states are the biggest losers in the new tax-sharing formula, says FICCI Telangana Chairman

HYDERABAD, Sep 29 (The CONNECT) - The Southern states are the biggest losers in the new tax-sharing formula.

This has come out of the “South India GST Conclave - an Online Interaction with the Ministers of three Southern States” organized by FICCI southern councils.

Murugesh R Nirani, Karnataka Industry Minister, K. N. Balagopal, Kerala Finance Minister and P Thiagarajan, Tamil Nadu Finance Minister participated in the conclave.  

Balagopal said Kerala’s tax collection used to be 14% to 16% before the GST, but it has reached a stagnation point which may be partly due to covid and partly due inherent structural defects of the system.  The revenue share of states was reduced to 11.3%. It has become a very serious situation, he said and argued that the GST system is very much against the principles of the Federal System.  The state governments are facing financial problems because of GST.

Thiagarajan deplored States’ loss of Fiscal Autonomy in a Centralised Federal System.  States have very little independence in the matter of taxation. This is also confirmed by a survey.   States primarily depend on two sources for their revenue - their revenue and central transfers. Since its implementation, the GST regime has reduced the resource-generating capacity of States.  It is also leading to inter-State inequality.

Nirani hailed GST though he said there are few issues still to be resolved. He thanked Prime Minister Narendra Modi and others for the major tax reforms.  GST, he said, enabled scientific assessment of Tax.  

Earlier setting the tone for the discussion T. Muralidharan, FICCI Telangana Chairman explained why they felt the need for organizing such a conclave and what the context was.  

The Southern states are the biggest losers in the new tax-sharing formula. Since the implementation of GST four years are already over.  The GST Council is very unique and it is the most powerful federal body.  A few years ago nobody imagined that we would be plagued by COVID.  The GST collection in the past few years has been unimpressive and major States are witnessing huge shortfalls.  He also explained why the Conclave of Southern states and reasons behind.  

South is the region with four non-BJP and one BJP ruling state.  The collective voice is very important. 

He said the collective wisdom of the five states is much more powerful than each one raising their individual voice.  He also touched upon how the non-cooperation between Union and the state may likely lead to a constitutional crisis like water disputes between the states.  The GST Council may be a Constitutional Crisis in the Making. “As it is a genuine federal institution, we must make it work,” he said. 

A. Murali Krishna Reddy, Co-Chair welcomed the gathering

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