The Tamil Nadu government has sought an early settlement of Rs 5,427-crore integrated goods and services tax (IGST) dues to the state for the financial year 2017-18, along with the ad-hoc settlement of IGST dues for September 2018.
In a memorandum to Prime Minister Narendra Modi, state chief minister Edappadi K Palaniswami on Monday said a significant shortfall in the settlements of amounts due to Tamil Nadu was found and accordingly the issue was flagged off to Union finance minister Piyush Goyal on July 6, 2018, for early settlement of the unsettled IGST to Tamil Nadu.
The IGST collected is meant for distribution between the Centre and the states. Close to 50% of the IGST will accrue to the Centre and 50% to states. States would receive IGST in proportion to the consumption of goods and services on the destination principle.
The share of Tamil Nadu roughly works out to be Rs 6,730.6 crore of which Rs 1,304 crore has only been settled and a balance of Rs 5,426.60 crore remains unsettled. He requested the Prime Minister to issue instructions to the finance ministry for early settlement of the unsettled IGST of Rs 5,426.60 crore to Tamil Nadu for the financial year 2017-2018 and the ad-hoc settlement of IGST due for September, 2018.
The chief minister, in his 20-point memorandum, has also sought special assistance of Rs 2,000 crore as compensation for the unfair treatment that the state received under the 14th Finance Commission.
The 14th Finance Commission had recommended an increase of 10% in vertical devolution from 32% to 42% to the states.
Though the share in Central taxes due to vertical devolution has been increased, in reality the effect has been neutralised by reduction in the horizontal devolutionary share of central taxes to Tamil Nadu from 4.97% to 4.02%. This reduction in the inter-se share to Tamil Nadu is 19.04%, which is the highest erosion in share amongst all states. Thus, the combined effect on Tamil Nadu’s overall share in Central taxes has increased from 1.59% to 1.69% only, he pointed out.
According to him, the average increase in share of Central taxes during the year 2015-16 over 2014-15 is 46.06% among fifteen major states and 49.85% among all the states, whereas Tamil Nadu could get an increase of only 20.98%.
“This was the lowest amongst all the states. Further, Tamil Nadu is the only state to get an increase in share of central taxes lesser than 30%. By discounting the 18% growth rate in Central tax collection, Tamil Nadu has benefited only by 2.98% additionally over and above normal growth due to the increased share recommended by 14th Finance Commission, while all other states benefited by 31% on an average over and above the growth rate in central taxes,” the chief minister said.