The Tamil Nadu government has called for personal intervention of Prime Minister Manmohan Singh to solve the issues concerning the Constitution (115th Amendment) Bill, 2011, saying the Goods and Services Tax (GST) in its present form encroaches upon the powers of state government.
In a letter to the Prime Minister, Tamil Nadu chief minister J Jayalalithaa said that any tax reform measures of the Union government should neither reduce the revenue flow from sales tax, the only major source of revenue for the state governments, nor should it adversely affect the fiscal autonomy of the states.
“We also strongly believe that harmonisation will not be achieved merely by adopting a common rate for all the commodities across the country when the states have diverse resource bases and requirements,” she said.
The implementation of GST with two rates initially and converging into a single rate later was not workable, she said.
In states like Tamil Nadu, where the tax neutral rate is as high as 17 per cent, this will lead to a huge loss of more than Rs 5,000 crore per annum. Any proposal of GST structure will have to address these concerns, she added.
Further, the states are also not clear about critical issues including the tax structure, methodlogy of Integrated Goods & Services Tax (IGST), powers of the state in altering tax rates, in levying cess, giving exemptions to certain commodities of local importance and the compensation mechanism, she said in her letter.
The state governments would pursue the matter further in the empowered committee of state finance ministers chaired by Sushil Kumar Modi, she added.
In a seperate letter to the all non-Congress chief ministers in the country, she asked them to take up “the matter with the government of India in a coordinated manner to impress upon the Centre that the fiscal autonomy of the states should not be compromised in any way.”
