Economy

TN to Centre: Do not restrict externally-aided projects

Our Bureau Chennai | Updated on January 18, 2021

Deputy Chief Minister O. Paneerselvam (file photo).

The Tamil Nadu government has urged the Centre that projects that are at an advanced stage of consideration be approved for implementation by the Ministry of Finance without any restrictions and limitations.

The State has a long track record of efficient implementation of externally-aided projects. Several multilateral aid agencies have worked with different departments and agencies to design projects in multiple sectors.

“However, we learn that the Ministry of Finance now intends to approve only one externally aided project per agency per State in a year. Such an abrupt change in policy greatly disrupts the development plans of Tamil Nadu, which has already gone ahead based on the Department of Economic Affairs Screening Committee approval with project preparation and with securing readiness,” O Paneerselvam, Tamil Nadu Finance Minister, said at a pre-budget meeting with Union Finance Minister Nirmala Sitharaman.

Water projects

Tamil Nadu is a water deficient State. To overcome the water deficit, the State has sought implementation of several critical projects, including Peninsular River Link project to transfer water from the Godavari and subsequently the Mahanadhi to the Cauvery. The State has also commenced the implementation of the Cauvery-Gundar Link project costing ₹14,400 crore. Central Government funding is sought under the National Perspective Plan, said Paneerselvam, who is also the Deputy Chief Minister.

Infrastructure projects

Paneerselvam also sought the Centre’s approval for implementation of Phase-II of the Chennai Metro Rail Project costing ₹61,843 crore with equal equity shares of at least 15 per cent each of the Central and State Governments as was done for Phase-I.

For the Tamil Nadu Defence Industrial Corridor, financial assistance of ₹5,000 crore may be provided by the Centre to develop the critical infrastructure and common facilities required for defence/aerospace industries in the 5 nodes of the TNDIC- Chennai, Salem, Hosur, Coimbatore and Tiruchi.

International automobile companies have made substantial investments in India and specifically in Tamil Nadu. They have requested an extension of the period under the tax loss carry forward (TLCF) scheme. At present, under the Income Tax Act, losses can be carried forward up to eight years and adjusted against future profits. Internationally, this period is 20 years or even longer. An extension of at least five years, especially in the light of the Covid-19 pandemic, would definitely enhance India's competitiveness in attracting and retaining foreign investments, he said.

GST on property deals

The GST rate on property transactions was changed from 12 per cent with Input Tax Credit (ITC) to 5 per cent without ITC from April 1, 2019. For affordable housing, the corresponding reduction was from 8 per cent to 1 per cent. While the new tax rate without ITC applied to all new projects, builders were given a one-time option to pick between the old and the new rates for projects which were incomplete as on March 31, 2019.

Many builders have been repeatedly representing that the option of levy of GST at 12 per cent with ITC should be retained as it captures value addition at multiple stages and does not over burden the builders and home buyers. Since the construction industry is a prime mover with considerable employment potential, the option of levy of GST at 5 per cent without ITC and at 12 per cent with ITC may be provided to builders, said Paneerselvam.

Published on January 18, 2021

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