TN Finance Minister urges Centre to merge cesses, surcharge in basic tax rate

Tamil Nadu finance minister, Palanivel Thiaga Rajan on Thursday requested the Union government to merge cesses and surcharge to the basic rate of taxes, saying that this would help the states receive their legitimate share in devolution.

A statement from his office said that Thiaga Rajan, while participating in a meeting called by Union Finance Minister Nirmala Sitharaman at New Delhi, said that the increased levy of cesses and surcharges that do not form part of the divisible pool of taxes has adversely affected the transfer of resources to Tamil Nadu.

The minister also said that the cesses and surcharges as a proportion of the Gross Tax Revenue of the Centre have almost increased three times from 6.26 per cent in 2010-11 to 19.9 per cent in 2020-21, and the states are deprived of a share in approximately 20 per cent of the revenue collected by the Union government.

He said that if this amount was added to the divisible pool, the states would have received an additional transfer of around Rs 1.5 lakh crore as their share from the Central pool of taxes in the current financial year.

Thiaga Rajan also demanded a rollback of the the decision to increase the GST for textiles and apparel from 5 per cent to 12 per cent, contending that this move would crush the traditional handloom sectors and the MSME sectors that are reeling under the effects of the Covid pandemic.

Handloom researcher and Chennai-based think tank Centre for Policy and Development Studies Director C. Rajeev told IANS that they support the demand for reversing the GST rate on apparel and textiles.

“We have been spearheading a campaign against the move to increase the GST of apparel and textiles. Several handloom weavers and craftsmen have told me that they are quitting the profession and will work as MGNREGS workers if the GST is raised to this level. Several traditional sarees and clothes of Tamil Nadu will be lost in oblivion if the Centre does not reverse this.”

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