State governments have suffered considerable loss of autonomy in taxation after the introduction of GST, according to Finance Ministers of Kerala and Tamil Nadu.

They were addressing the South India Finance Minister’s GST Conclave organised by Federation of Indian Chambers of Commerce and Industry (FICCI).

Kerala Finance Minister KN Balagopal said, ‘Kerala had an income growth of 14 to 16 per cent prior to GST and the first two years of GST implementation saw a stagnation of income growth and this was followed by a negative growth due to the pandemic,” he said.

Taking up the case of petroleum products, Balagopal said the State Government collects ₹17 on a litre of diesel while the Centre takes away ₹31 and a good portion of the Centre’s incomes comes through cess which is not shared with States.

‘Half autonomy lost’

While direct tax has been with the Centre and the States had some autonomy on the indirect tax front earlier. But with GST, half of this autonomy has gone,” said Palanivel Thiaga Rajan, Finance Minister of Tamil Nadu. The States’ fears of losing autonomy with the GST regime have come true, he added.

The States have very little independence now in any matters of taxation now,” he said, stressing that many problems can be resolved to the satisfaction of the States and industry if the GST decisions are data-driven. The ratio of direct and indirect taxes too has changed as the cess portion, which goes into the indivisible pool, has increased. This has affected the States’ finances, he added.

According to Thiaga Rajan, India is the only country where so much power on taxation rests with the Centre. In countries like the US and China, both direct and indirect taxes are divided at the State, district and county-levels.

‘GST collections improving’

Karnataka Industries Minister Murugesh Nirani said the GST collections in the past few months have been improving as the economy is coming out of the pandemic. GST has helped interstate movement of goods. There are issues in the system, but they can be fixed, he said. He thanked the Prime Minister, the Union Finance Minister and members of the GST Council for ushering in the major tax reform.

Chairman of FICCI Task Force on GST Sachin Menon, FICCI Telangana Chairman T Muralidharan, FICCI Karnataka Chairman K Ullas Kamath, FICCI Kerala State Council Co- Chair Deepak Aswani, FICCI Tamil Nadu chair GS Velu, FICCI Telangana Co-chair Murali Krishna Reddy, FICCI Secretary general Dilip Chenoy, Shamam Legal Founder and Senior partner Mukul Gupta addressed the conclave.