The Tamil Nadu Government today said non-implementation of the Goods and Service Tax (GST) from April 1, 2010, should not be the ground for stopping Central Sales Tax compensation to States, whose revenue loss is “substantial and permanent”.
“Since it is the Government of India’s responsibility to introduce GST by evolving a consensus and by putting in place appropriate mechanisms, the States cannot be expected to bear the loss on account of its failure to introduce GST,” Chief Minister, Ms J. Jayalalithaa, wrote to the Prime Minister, Dr Manmohan Singh, seeking his personal intervention to sort out the issue.
Ms Jayalalithaa said, “The Government of India has a moral responsibility to compensate States till GST is introduced.” The CST rate was reduced only as a precursor to introduction of GST, she said.
“Non-implementation of GST from April 1, 2010, should not be taken as a ground to stop CST compensation and the Centre has to provide compensation till GST is introduced as the revenue loss suffered by the States is substantial and permanent,” she said.
Drawing Dr Singh’s attention to compensating States for loss in revenue due to reduction of rate of CST for 2010-11 and subsequent years, she said the Chairman of the Empowered Committee of State Finance Ministers had conveyed the objections of the State Governments, including Tamil Nadu.
“But it is unfortunate that the Government of India is still sticking to its unreasonable stance,” Ms Jayalalithaa said.