Kerala Finance Minister KN Balagopal, on Friday, November 25, urged the Union government to provide more fiscal powers to the states as well as increase the shareable proportion of the Goods and Services Tax (GST) collections. Besides, he asked the Union government to expedite approval for the controversial semi-high-speed railway line or the Silverline project from Thiruvananthapuram to Kasargod. The demands were raised during the pre-Budget consultations with Union Finance Minister Nirmala Sitharaman. The Budget for 2023-24 is to be presented on February 1 next year.
The state economies are in the stage of transition from recession ushered in by the pandemic, and ‘neo restrictions’ in the form of fiscal consolidation at this stage could only help the transitional cycle to move reversely, the minister said. "We submit that states must be given more fiscal powers/ autonomy to ensure cooperative federalism and encourage state-specific efforts to attain growth and ensure social justice," he added in the submission.
With respect to the Goods and Services Tax (GST), the demand is for increasing the shareable proportion of GST collection from the 50:50 ratio to the 60:40 ratio in favour of the states, as well as extending the GST compensation period. The five-year GST compensation period ended in June this year.
According to the submission, the share of central surcharges and cesses have been increased from around 10% to 20% of the Gross Tax Revenue (10.4% in 2011-12 and 19.90% in 2020-21) over the last decade. "This has reduced the share of states from the divisible pool as a percentage of the Gross Tax Revenue of the Union... the Union may restrict surcharges and cesses as a fixed per cent of Gross Tax Revenues (GTR) so that the divisible pool of taxes does not shrink substantially," it added.
Further, the minister has urged the Union government to rationalise cess and surcharges, and also enhance revenue-neutral rates by taxing luxury items more. Among others, the state has mooted the proposal of linking part of the additional borrowing limit with capital expenditure. "It will be a welcome move to have an expert committee to examine the specific liquidity problems faced by the states, and Ways and Means and overdraft limits are redefined".
Kerala has also sought a special package for the economic rehabilitation of the return migrants in the Budget.