Jaya voices opposition to GST

Voicing her reservations over the Goods and Services Tax(GST), Tamil Nadu Chief Minister today told Prime Minister Narendra Modi that the Centre should strive for a broad consensus on important issues like the compensation period and exclusion of commodities before enacting the Constitution amendment.
In her first meeting with the Prime Minister after her election victory, she said Tamil Nadu is concerned about the impact the proposed GST will have on the fiscal economy of the states and the huge revenue loss it is likely to cause to manufacturing and net exporting state like hers.
Jayalalithaa-led AIADMK has 13 MPs in the Rajya Sabha where the BJP-led NDA government is in a minority and looks to its support on crucial issues and legislations. The party has 37 MPs in the lower house.

While appreciating the fact that some of the state's concerns have been addressed, Jayalalithaa said in a memorandum to Modi which held that a number of other concerns of Tamil Nadu still need to be addressed.
This included the GST Council as a Constitutional body which it said impinges on the legislative sovereignty of both Parliament and state legislatures and jeopardises the autonomy of the states in fiscal matters.
"We strongly object to the provision for the GST Council. The existing mechanism of the Empowered Committee of state ministers which dealt with VAT issues is adequate. Ideally, no statutory GST Council is required," it said.

Jayalalithaa demanded that petroleum and petroleum products must be kept outside GST permanently in view of the revenue impact and the positive environmental and social impact of high effective taxation of these items.

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The chief minister said it is quite clear that a manufacturing state like Tamil Nadu will permanently lose substantial revenue if GST is implemented.
"Due to the difficulty in fixing even nominally high revenue neutral rates, it is expected that the extend of revenue loss under GST would be around Rs 9,270 crores for Tamil Nadu," the memorandum said.
Tamil Nadu also reiterated its demand for a Constitutionally mandated independent compensation mechanism for full (100 per cent) compensation of revenue losses suffered by the states for a period of not less that five years.

It suggested that in lieu of the proposed additional levy of 1 per cent tax on inter-state supply of goods, the origin states may be allowed to retain four per cent of the Central GST, part of the inter-state GST that would be leviable on inter-state supply of goods and services as this would ensure speedy recompense for a portion of the revenue loss and will reduce the amount of compensation payable.
Further, the memorandum said, as this comes out of the CGST component, it does not affect the destination state's revenue or cause any cascading.
"Hence, the stand of the Government of Tamil Nadu is that before the Constitutional Amendment Bill on GST is taken up, the Government of India should strive for a board consensus on important issues like the compensation period and methodology, revenue neutral rates, floor rates with bands, commodities to be excluded from GST, the IGST model and clarity on dual administrative control, so that the genuine apprehensions of states regarding loss of fiscal autonomy and permanent revenue loss are allayed," it said.