Days after the Centre introduced the Constitutional Amendment Bill in Parliament on rolling out the Goods and Services Tax (GST), the uniform tax regime across the country, states on Friday demanded early redressal of their concerns on revenue loss while pressing for release of more funds.
They also sought greater say in implementation of Central schemes. Besides seeking decentralisation of Centrally Sponsored Schemes (CSS), the states in a pre-budget meeting with Finance Minister Arun Jaitley, demanded greater ability to borrow money from the market to finance infrastructure sector development.
"We will take all these suggestions into consideration while formulating policies for Budget," Jaitley told reporters after a four-hour long meeting with state finance ministers. States also demanded that budget for 2015-16 should make adequate provisions for central sales tax (CST) compensation for early roll out of Goods and Services Tax (GST), a Constitutional Amendment Bill for which was tabled in the lok Sabha last week.
The state finance ministers suggested that the borrowing limits under the FRBM Act should be raised so that could raise money money to finance infrastructure. AIADMK-ruled Tamil Nadu opposed introduction of the GST Bill without evolving a consensus on critical aspects like revenue neutral rates and bands, compensation methodology and thresholds.
"This is not acceptable to us. We would rather suggest that the Government of India should permit the empowered committee of state finance ministers to decide on these issues before enactment of the Bill," State Chief Minister O Panneerselvam said at the meeting. Telengana, ruled by Telangana Rashtra Samiti (TRS), sought a provision in the Budget for compensation of revenue loss suffered by states due to reduction in CST.
Kerala Finance Minister K M Mani said the concerns of the states should be addressed at the earliest, while BJP-governed Gujarat demanded that 1 per cent additional tax above the GST rates should continue until advised to the contrary by the states. At the meeting, Jaitley said the biggest challenge before the country was to increase the growth rate as it would boost both economic activities and revenue collections.
"As per different estimates, our growth rate would be 6-6.5 per cent during 2015-16," he said, adding services sector has shown good growth while growth in manufacturing sector is bit patchy. India is likely to clock a growth rate of 5.5 per cent in the current year, bettering 4.7 per cent of 2013-14. Briefing reporters about the deliberations at the meeting, Jaitley said there was overwhelming support for the Centre's GST proposal which, he said, was arrived at in consultation with states. "The states are of course anxious that CST compensation be paid to them expeditiously," he added.
Some states, he said, went to the extent of suggesting that FRBM limits be raised this year to infuse liquidity into the markets. "Most states also wanted decentralisation of CSS so that they could be attuned more to the state requirements. Several states made suggestion with regard to their state specific issue," the Finance Minister informed.
Many states raised issues pertaining to stuck projects, inadequate central grant, little or no say in implementation of CSS and financial inclusion.