Express news service
CHENNAI: Tamil Nadu’s Finance Minister Palanivel Thiaga Rajan on Thursday called on the Union government to merge taxes and surcharges into base tax rates so that states receive their legitimate share in decentralization.
Attending the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi, Rajan said: “The fathers of the Constitution endowed states with certain powers of taxation and mandated a sharing of taxes between the Union and States. This initial balance which was already biased against true fiscal federalism was further biased in favor of the Union over a period of time. “
Elaborating on this point, Rajan pointed out that the increase in the levy of taxes and surcharges, which are not part of the divisible pool of taxes, has hampered the transfer of resources to states.
“Royalties and surcharges as a proportion of the Centre’s gross tax revenue almost tripled, from 6.26% in 2010-11 to 19.9% in 2020-21. In fact, states are deprived of a share of about 20% of the revenue collected. by the Union “, underlined the Minister.
Rajan said if these taxes were added to the divisible pool, states would have obtained an additional transfer of around Rs. 1.5 lakh crore as their share of the central tax pool in the current fiscal year.
Shedding more light on the consequences of the above realignment, the minister said the ratio of aid grants to central taxes has increased from 62.67 percent in fiscal year 2010-11 to 130 , 7 percent in 2020-21 for Tamil Nadu.
“While the share of taxes is a legitimate right and gives the state the autonomy necessary to meet local needs and aspirations, grants are discretionary and tied funds. This greatly encroaches on the federal structure enshrined in the Constitution, ”he said. added.
Rajan also called for the rescission of the Union government’s recent decision to increase the GST for the textile and clothing sector from 5 percent to 12 percent, saying the move would increase the financial burden on consumers. textile and hand-weaving sectors of already stressed MSMEs who are under the effects of the Covid pandemic.
The Minister called for the immediate intervention of the Union government to control the rise in the prices of goods and raw materials such as steel, copper, aluminum, coke, brass and cotton threads through to appropriate changes such as the structure of import duties, as they have an inflationary effect. effect on the prices of all other products.