Tamil Nadu Minister for Finance and Environment and Climate Change Thangam Thennarasu has urged the Centre to safeguard states’ revenues in the wake of the proposed Goods and Services Tax (GST) rate rationalisation.An official release here today said Mr Thennarasu participated in the meeting of the Group of Ministers on Life and Health Insurance Services and the Group of Ministers on restructuring Compensation Cess held in New Delhi yesterday, chaired by Union Finance Minister Nirmala Sitharaman.
The Minister welcomed the GST rate rationalisation initiative but emphasised that the revenue of states should not be adversely affected. “While many states, including Tamil Nadu, are implementing major infrastructure projects and social welfare schemes, rationalisation should not result in reduced revenue accruals to the states,” he stressed.
Particularly in the social welfare sector, states like Tamil Nadu are “showing the way to achieve full human potential by investing in health and education,” Mr Thennarasu noted.
He pointed out that the simultaneous reduction of GST rates and the phasing out of the compensatory cess would significantly affect the states’ revenue. He emphasised the need to extend the compensatory cess for another four to six years to offset this loss.
In the event of phasing out the cess on demerit goods, the Minister suggested devising an alternative mechanism to protect states’ revenues. As an immediate measure, he proposed raising the net borrowing ceiling of states to 4 per cent of GDP without any conditions.
Reiterating Tamil Nadu’s stand, Thennarasu said the State Government would extend full cooperation in restructuring the GST rate regime, but underlined that “the interests of states’ revenues should be sufficiently safeguarded.”