Tamil Nadu continues to oppose implementation of the Goods and Services Tax (GST). At a review meeting of finance and commercial taxes ministers in New Delhi on Thursday, state commercial taxes minister M C Sampath said the Centre should exempt tobacco and tobacco-related products along with fuel and liquor from the ambit of GST so that the states could levy taxes on these items.
GST envisages a common market and uniform taxation across the country to facilitate smooth transaction of goods and services but Tamil Nadu and a few other states have been opposing certain proposals fearing a loss of revenue. Tamil Nadu being a manufacturing state is expected to lose 3,500 crore annually due to scrapping of central sales tax (CST) and due to increase in the exemption limit "Tamil Nadu being a manufacturing state, it is expected to lose 3,500 crore annually due to abolition of the central sales tax (CST). The relevant act should be amended to automatically compensate the state for the loss of revenue," said Sampath. Goods of local importance should also be taken out of the purview of GST, he said.
As per the current plan, the loss to Tamil Nadu is intended to be compensated through a devolution formula of the 13th Finance Commission, which suggested a common pool for distribution of funds to states that face erosion in revenue after GST is rolled out. However, in the longer term, this increased dependency on the Centre has profound implications on the administration of a state run on the welfare model.
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