Deputy Chief Minister Mallu Bhatti Vikramarka said that the proposal of rate rationalisation and reduction of tax burden is always welcome, but at the same time, it must be balanced by ensuring that the revenues of the states are protected.
Otherwise, the welfare schemes meant for the poor and the middle class and infrastructure projects will suffer, he added.
On Thursday, the deputy chief minister attended a meeting of the Group of Ministers (GoM) on GST rate rationalisation in Delhi. The GoM was constituted by the GST Council to examine and make recommendations on rationalisation of GST slabs and change in rates.
During the meeting, Vikramarka stated: “At the time of introducing GST, the states were growing at 14 per cent and therefore were assured an annual growth of 14 per cent. To compensate losses, if any, GST compensation was introduced for a period of five years to stabilise the growth rate of 14 per cent. However, the 14 per cent growth rate has not stabilised and at present, the states remain at an annual growth of around 8 to 9 per cent only.”
Setting aside the ideal 14 per cent growth and the current 8 to 9 per cent growth, the proposals in isolation could lead towards a decline in revenues, he noted. Besides, southern states such as Telangana, Karnataka and Tamil Nadu are getting a far lower share in the form of devolution than their contribution to the national revenues, he said.
The deputy chief minister supported the proposed rate rationalisation as a part of GST reforms, but with a proper compensation mechanism.
In order to achieve the same, he proposed that the present compensation cess may be continued and the amount so collected may be given fully to the respective states. “Alternatively, while dispensing with compensation cess, the GST rates on sin or luxury goods may be increased and the additional amount so collected may be given to the respective states. This will reduce the tax burden on ordinary taxpayers while enabling the states to continue with the welfare of poorer sections and middle class as well as development and infrastructure projects for the people of the state,” he said.
Meanwhile, Agriculture Minister Thummala Nageswara Rao urged the Union government to exempt agricultural equipment from the 12 per cent GST slab. On Thursday, he wrote a letter to Prime Minister Narendra Modi, Union Finance Minister Nirmala Sitharaman and Union Agriculture Minister Shivraj Singh Chouhan in this regard.
