Equal voting rights to all states not acceptable: AIADMK on GST

All states having equal voting rights is not acceptable to AIADMK, says Spokesperson, K Pandiarajan talking about Goods of Services Tax (GST).

AIADMK is against GST in its current form as it believes Tamil Nadu is being penalised for being a producing state considering it contributes 10 percent to the GDP despite having only 4 percent of the country’s population.

TN produces more than it consumes. he says, adding shifting of tax levy from the point of origin may hurt the state’s revenues.

He says, the party is far from a consensus to approve GST due to the various concerns most notably on the issue of compensation for five years due to the loss in revenue.

Tamil Nadu may lose Rs 9,270 crore in revenues every year.

Four of the ten issues the party has raised has been addressed by the government, says Pandiarajan. However, on whether the party will vote in favour of or against the bill, he says the CM wil take a final call.

Below is the verbatim transcript of K Pandiarajan’s interview to Shereen Bhan on CNBC-TV18.

Q: The empowered panel on the goods and services tax (GST) met in the capital yesterday. Has there been any change in the AIADMK’s position when it comes to the GST? Do you support the GST Bill in its current avatar?

A: No not really. We raised about 10 issues initially. Our opposition is primarily based on the fact that Tamil Nadu is a producing state, it is an exporting state, we produce more than 50 percent of what we consume and we are also unique from that sense. While as a philosophy having a unified tax administration system across the country for both goods and services is acceptable to us, out of the 10 issues we raised, about four of them have been addressed to our satisfaction.

However, the key issue is the loss that we will suffer as an origin state over about five years. We have asked for compensation, at least five years though it is a permanent loss of around Rs 9,270 crore based on the current consumption and production per tonne. So, this is what we have asked. The second key thing we have asked is constitution of the GST council. We believe we don’t need a council like this in the first place as a statutory body but if you must have that, it can’t have the structure where central government has a veto.

We would like to see a council where states hold higher percentage of voting rights in proportion to their economic size. For instance, Tamil Nadu contributes 10 percent to the gross domestic product (GDP) to India though we are only 4 percent of the geography and only 6 percent of the population but we contribute 10 percent to the GDP of the country. What our CM has proposed is a voting percentage in-line with the membership of Rajya Sabha. In some sense the weightage of states have been factored into the Rajya Sabha representation for each of the states. So, we would like it to be along those lines and some of the aspects relating to petroleum being kept out of GST. It should be done permanently; that is what we are saying.

More importantly, this proposal relating to additional levy of 1 percent tax on the supply of goods, we are suggesting that the origin states be allowed to retain 4 percent of the central GST part, of the inter-state GST which would allows us better cash flow; that is really a method of allocation, method of charging which is what we have suggested. Sum and substance of it is that the kind of loss, of fiscal autonomy that each of the states will have to go through, this whole process, compensation cannot be in the hands of a parliament which you need to pass through the parliament and things like that. We believe that that is not going to work. It should be a simple and straight process for compensation where the central government has to agree with states like us. What we want is a constitutional rather independent body.

Q: You have said that out of the 10 demands that the AIADMK has raised, four demands have been met. Even as far as compensation is concerned, the Chief of the empowered panel, Amit Mitra, in his conversation with me yesterday said that the center now has changed the wording or will change the wording to guarantee compensation for five years to state governments. Does that satisfy you because that is one of your key apprehensions? Even as far as the 1 percent manufacturing tax is concerned, there seems to be unanimity or consensus at the state level that the 1 percent manufacturing tax is distortionary and hence must be done away with. So, if the 1 percent is done away with, will that be a deal breaker as far as the AIADMK is concerned?

A: There is some movement but the key thing is the quantum of compensation or the principle by which the compensation gets arrived at. In my view, we have given a picture as to how much is the loss to be suffered by Tamil Nadu in this case, so, Rs 9,270 crore per year. It is a permanent loss. To compensate it over at least five years is what we have sought.

In terms of the GST council, we have some serious question. We can’t have a GST council with center having veto and all states being equal in terms of the voting rights because that is what they have come up with which is not acceptable to us. CM has specifically spoken about this to the Prime Minister and Prime Minister has let the empowered committee of state finance minister’s to take a call on this issue. That is as critical an issue.

So, in that sense, the compensation in terms of its quantum and the compensation, in terms of the way it gets arrived at and the continuing controlling body, GST council, its constitution, its voting rights, all those are key issues for us. The other issue that we have asked for is to enable states to levy higher tax on tobacco.

Source : http://www.moneycontrol.com/news/current-affairs/equal-voting-rights-to-all-states-not-acceptable-aiadmkgst_7129381.html

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