The Chief Minister of Tamil Nadu, M.K. Stalin, has been quite vocal against Prime Minister Narendra Modi on the recent Goods and Services Tax (GST) implementation claiming that the fiscal benefit being boasted of by the centre is massively on the shoulders of the states. Half of the savings which the government boasts to realise is in the hands of the consumers, are actually borne by the state governments, not to mention that it is the state governments which are not acknowledging their responsibility to realise the burden of financial loads and that they are not appreciating it, warns Stalin. He further observed that the Centre is literally depriving the states of the funds that rightfully belong to them and that increased the wide of the fiscal gap.
The argument by Modi that Indians will save 2.5 lakh crore with GST and income taxes reforms was also dismissed by Stalin as an opposition rhetoric outcome. He said that, had these measures been put in place eight years ago, families throughout the country would already have benefited far more in terms of savings. The implication of this by the CM is that the opposition has been lobbying these cuts throughout but the central government has been slow to take action.
The new GST regime became effective on September 22 on the inaugural day of Navratri and Modi termed it as a GST Bachat Utsav or savings festival. In the new system, the four old slabs, 5 per cent, 12 per cent, 18 per cent and 28 per cent have been reduced to two major rates; 5 per cent on items of daily use, and 18 per cent on most goods and services. Ultra-luxury and sin goods like the high-end electronics and luxurious appliances are now taxed at 40 per cent and an extra cess on top of the previously 28 per cent on tobacco and its products. GST on foodstuffs like snacks, coffee, ghee, paneer, butter, ketchup, jam, dry fruits and ice cream have been reduced along with the taxes imposed on the aspirational goods like TVs, air conditioners and washing machines.
Whereas Modi applauded the relocation as a blessing to the poor and even the neo- middle class, in which he said that the youth, farmers, women, shopkeepers, traders and entrepreneurs would all have a good time, a wider discussion is captured by the criticism of Stalin. The state-federal fiscal process is undergoing testing since the centre is giving up an increasing amount of tax revenue to the states, but the states have to deal with the fiscal strains of taking in the tax-cut transfers. The GST Bachat Utsav hence is not simply a headline on the topic of savings, but double-dealing on finance, responsibility and the politics of relief.
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