Tamil Nadu will look for GST compensation period extension, industry-related measures
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Tamil Nadu Finance Minister Palanivel Thiaga Rajan. File photo
| Photo Credit: S. Siva Saravanan

The Union Budget 2023-24, to be presented by Finance Minister Nirmala Sitharaman on Wednesday, would be keenly watched in Tamil Nadu for announcements on the extension of the GST compensation period, besides industry-related measures.

At a pre-budget meeting chaired by Ms. Sitharaman in November, Tamil Nadu Finance Minister Palanivel Thiaga Rajan sought a slew of measures. The key among them was the extension of the Production Linked Incentive (PLI) Scheme for the leather and non-leather footwear sector and for Green hydrogen and electrolyzer manufacturers.

Highlighting the woes of the garment sector in the Tiruppur cluster due to such factors as the Russia-Ukraine War and an anticipated slowdown in the West, he also sought a special Emergency Credit Line Guarantee Scheme for the micro, small and medium enterprises in the sector with a 20% additional collateral-free credit.

Mr. Thiaga Rajan also sought a cut in duties on imported wood to attract investment in the International Furniture Park at Thoothukudi.

The State government has requested the Union government to soon commence the establishment of the All India Institute of Medical Sciences (AIIMS) in Madurai.

Railway projects

Besides, he sought a slew of railway projects, including a new Tirupattur-Krishnagiri-Hosur line (₹1,486 crore); the Tambaram-Chengalpattu fourth line (₹600 crore); the doubling of the Arakkonam-Kanchipuram-Chengalpattu line (₹1,360 crore); and the Vandhe Bharat services from Chennai to Madurai and Coimbatore.

Pointing out that State’s GST revenue was yet to recover fully, Mr. Thiaga Rajan wanted the compensation period, which came to an end on June 30 last year, extended by at least two more years and an earlier release of compensation dues. According to a study done by the Reserve Bank of India, while Tamil Nadu is among the top five GST compensation States during the 2017-2022 transition period, it would not be impacted much by the end of the compensation regime, for the compensation accounted for less than 10% of the State’s tax revenue.

The State government has reiterated its concerns about the Union government increasing the levy of cesses and surcharges and demanded that they be merged with the basic rates of tax for the States to receive their legitimate share in devolution.

It has also flagged issues such as the National Disaster Management Authority not releasing ₹500 crore towards reducing the risk of urban flooding in Chennai for the period 2021-22 to 2025-26, as recommended in the final report of the 15th Finance Commission.

On a positive side, the State’s share in the Central taxes is expected to be higher.

In the recent Assembly session, Mr. Thiaga Rajan said the State had budgeted for ₹33,311 crore as its share in the Central taxes for 2022-23, and 46.05% of it had been received till September last. An increase in the share in the Central taxes over the budgeted estimates was expected owing to the improvement in economic activity and the resultant tax collection after the pandemic, he said.

The trend of increased devolution in the Central taxes is likely to continue in 2023-24, if there is no major impact from the recessionary trends predicted globally.

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