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Ministers of three Southern states who participated in the Conclave expressed their concern about southern states losing more in the new tax-sharing formula

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Hyderabad: In a first-ever attempt FICCI, brought together four Southern State Councils of it on board to organise a unique event– “South India GST Conclave – an Online Interaction with the Ministers of three Southern States”.

Shri Murugesh R Nirani, Hon’ble Industry Minister, Govt. of Karnataka; Shri. K. N. Balagopal, Hon’ble Finance Minister, Govt. of Kerala; Shri P Thiagarajan, Hon’ble Finance Minister, Govt. of Tamil Nadu participated in the conclave.  

Participating in the conclave,  Shri. K. N. Balagopal, Hon’ble Finance Minister, Govt. of Kerala appreciated the Southern State Councils of FICCI for organizing a conclave on such a need of the hour subject.  Kerala’s tax collection used to be 14 to 16% before the GST, but it has reached a stagnation which may be partly due to covid and partly due inherent structural defects of the system.  The revenue share of states was reduced from 16%  to 11.3%  added to the woes. It has become a very serious situation, he said.

Speaking further he added that the GST system is very much against the principles of the Federal System.  The state governments are facing financial problems because of GST.

Shri P Thiagarajan, Hon’ble Finance Minister, Govt. of Tamil Nadu said the GST system is shaky.  He 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. To tide over a few loose ends, he suggested that data must be used to make decisions.

Shri Murugesh R Nirani, Hon’ble Industry Minister, Govt. of Karnataka had given his overall satisfaction about it. He thanked Prime Minister Mr Narendra Modi and others for major tax reforms.  GST, he said, enabled scientific assessment of Tax.  GST helped more tax compliance. The states have seen increased revenues.  However, there are few issues still to be resolved,  he said. 

Earlier setting the tone for the discussion Mr T. Muralidharan, FICCI Tealanga Chairman explained why they felt the need for organizing such a conclave and what the context was.  This was the first-ever conclave on the subject concerning all the stakeholders.  That is why we brought all of them on the single platform.  FICCI always used to give a proactive presentation of industry point of view.  But, moving away from that, in this case,  we are n acting as a bridge for the first time he said.

Adding further he stated that the conclave was being organised in the context of testing times.

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.  The collective wisdom of the five states is much more powerful than each one raising their 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. 

The views and concerns expressed by participants will be compiled and a report shall be submitted to the Ministry of Finance, Govt. of India, Mr Muralidharan informed..

Mr. A. Murali Krishna Reddy, Co-Chair welcomed the gathering. GSK Velu FICCI Tamil Nadu State Council Chairman; Mr K Ullas Kamath, Karnataka State Council Chairman and Mr Deepak L. Aswani  Co-Chairman of FICCI Kerala State Council Kerala introduced their respective state Ministers. 

Dilip Chenoy, Secretary-General of FICCI proposed a vote of thanks.  This was a combined effort of all to make GST law simple and easy to implement, he concluded   

The GST Council was formed in the year 2017. Though the GST Act was introduced in the year 2017, there were a lot of issues and challenges especially in CGST distribution in various States. The 15th Finance Commission left the share of states in central taxes virtually unchanged, but its revamped formula for how the proceeds are allocated between states will result in significant gains for Maharashtra, Rajasthan, Arunachal Pradesh & Bihar. The southern states of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Telangana are the biggest losers.

In this light of the background, the Conclave was planned with a single motive to how we can make GST work well for everybody. 

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