Latest news with #Centre-State
India Today
2 days ago
- Business
- India Today
Two new GST levies may replace compensation cess, but at what cost?
With the compensation cess set to expire by March 1, 2026, the Centre is likely to propose two new levies — a Health Cess on tobacco and other harmful substances and a Clean Energy Cess on coal and automobiles, as part of the discussions at the upcoming GST Council meeting in move aims to fill the revenue gap that will open up once the transitional compensation cess is phased out. While these cesses are still under consideration, experts say they may introduce fresh complexity into the GST regime, especially for businesses and the broader Centre-State revenue-sharing IMPACT'GST was a landmark tax reform which then sought to replace a complex web of fragmented state taxation systems that were in existence before 2017,' said chartered accountant Siddharth Surana. 'Prior to 2017, states and union territories implemented and administered their own system of Value Added Tax, and the revenues from these taxes fell directly within their purview with no major need for fiscal co-operation and Centre-State harmony,' he added.'To offset the loss by the introduction of GST and the harmonisation of GST rates, the state governments were provided with compensation cess, which was a tax in addition to GST, and was applicable on certain demerit goods and sin products such as aerated beverages, automobiles and tobacco. The compensation cess was introduced only for a temporary period of time as a transitional measure, which was to end in 2022. However, with several extensions, this is likely to expire on 1st March 2026," Surana explained that the new cesses being discussed are unlikely to compromise the structural integrity of the GST system. 'In our understanding, as these levies are centrally proposed and are likely to follow the structure proposed by the central government, they are likely to be standard levies and do not pose a risk to return to the fragmented pre-GST tax structure,' he said.'Also, the taxes are targeted at very few products, mostly falling within the present 28% GST slab. Thus, while they may not affect the structure of GST, the major cause of concern would be distribution. The central and state governments would have to work out the method of distribution of proceeds of these cesses and this will require cooperative federalism,' Surana also pointed out that businesses are likely to feel the impact of any new levy on three key fronts.'In our opinion, the introduction of any new levy does have an impact on businesses on three fronts – costs, compliance and supply chain. The introduction of 2 new cesses are likely to increase the compliance burden on industry. It will also entail a change in the return formats and companies will have to adapt to the changing presentation and disclosure norms,' he compliance, Surana suggested that the policy intent behind these cesses is to influence corporate behaviour.'Further, it appears that the purpose of introducing these taxes is to increase the cost of products that are harmful to the environment and, therefore, may put more pressure on corporates to become more sustainable,' he added that the Clean Energy Cess, in particular, aligns with the government's push toward green energy. 'The use of coal as a source of power has tremendous ecological costs, and the replacement of coal with renewable sources of energy has been an objective of the government. We believe that the levy of cesses on products like automobiles will create ecological consciousness and force companies to revisit their supply chain and adopt sustainable practices.'
The Hindu
02-06-2025
- Politics
- The Hindu
High-level committee on Centre-State relations calls on T.N. CM Stalin
The high-level committee, constituted by the Tamil Nadu government to review the Union government-State relations, called on Chief Minister M.K. Stalin in the Secretariat in Chennai on Monday (June 2, 2025). The committee's chairman, retired Supreme Court judge Justice Kurian Joseph, and members, retired IAS officer K. Ashok Vardhan Shetty and former State Planning Commission vice-chairman M. Naganathan, met the Chief Minister. Chief Secretary N. Muruganandam and senior officials of the Public Department were also present on the occasion. Mr. Stalin, in April 2025, announced in the Legislative Assembly the formation of the three-member high-level committee to review the provisions of the Constitution, laws, and policies with respect to Centre-State relations, and recommend appropriate steps to strengthen the States' autonomy and federalism.
The Hindu
22-05-2025
- Business
- The Hindu
Watch: Why some States are upset with the Centre over revenue sharing: Part 1
Why some States are upset with the Centre over revenue sharing: Part 1 Almost every State — including those ruled by the BJP — is calling for a change in the current revenue-sharing formula with the Central government. To understand this growing demand, it's crucial to first unpack how the Centre earns revenue, what constitutes the 'divisible pool,' and why many States view the existing formula as inequitable — a concern that has only deepened in the post-pandemic years. In the first part of this three-part series, The Hindu Data Team simplifies the complexities of fiscal federalism using a ₹100 note to illustrate how funds are shared. The Fifteenth Finance Commission had recommended that 41% of the divisible pool be allocated to States. Now, the Sixteenth Finance Commission is visiting all States to determine the new revenue-sharing formula for the next five years. This series delves into the roots of the Centre-State fiscal debate and explores the road ahead. Presentation and scripting: Vignesh Radhakrishnan Editing: Sambavi Parthasarathy Camera: Thamodharan B.
Hindustan Times
19-05-2025
- Business
- Hindustan Times
Uttarakhand seeks hike in tax share for forest and ecology from 10 to 20%
Dehradun: The Uttarakhand government on Monday sought appropriate compensation in accordance with the spirit of 'Environmental Federalism' in view of the 'Eco-Service Cost' of Uttarakhand from the 16th Finance Commission (FC), urging it to increase the weight prescribed for 'forest and ecology' in Centre-state tax-sharing from 10 to 20% and in area category from 15 to 20%. The state government also requested that special grants should be considered for the proper management and conservation of forests in the state. These requests were made by chief minister Pushkar Singh Dhami on Monday, in a meeting with the chairman of the 16th Finance Commission, Arvind Panagariya and other members of the FC at the Secretariat here. Panagariya, during a press briefing after the meeting, said the share of Uttarakhand in the Centre-State fund sharing under the Finance Commission is determined by the recommendations of the Finance Commission, which allocates a portion of the central taxes to each state based on specific criteria. 'According to the 15th Finance Commission (2020-2026), the share of states in the central taxes was set at 41% of the divisible pool, and each state's individual share is calculated using criteria such as income distance (45% weight), population (15%), area (15%), forest and ecology (10%), total fertility rate (12.5%), and tax effort (2.5%).' He said, 'The Uttarakhand government has urged FC to consider income distance (at 40%), population (15%), area (20%), forest and ecology (20%), Total Fertility Rate (state government has urged that it should not be used as criteria for tax devolution) and tax effort (2.5%). Uttarakhand has also urged that it be rewarded for fiscal discipline.' Dhami earlier in the meeting presented the state's stand in detail on the financial conditions, challenges and development needs of the state. He said that due to over 70% of the total geographical area of the state being covered with forests, two major challenges are also being faced. 'While on one hand, more expenditure has to be made for the conservation of forests, on the other hand, due to the prohibition of any other development activity in the forest area, 'eco service cost' also has to be borne. So, I request for giving appropriate compensation in accordance with the spirit of 'Environmental Federalism', increasing the weight prescribed for forest cover in 'Tax-Transfer' by 20% and giving special grant for proper management and conservation of forests in the state Dhami said that in the last 25 years, Uttarakhand has made remarkable progress in the field of financial management like other areas. 'After the establishment of the state, the state had to depend on external loans to develop its basic infrastructure. While on the one hand the state has achieved remarkable achievements on the basis of various parameters of development, the size of the budget has crossed one lakh crore rupees. In the SDG Index Report of the year 2023-24 released by NITI Aayog, Uttarakhand has emerged as the leading state among the states achieving the goals of sustainable development. The unemployment rate of the state has come down by a record 4.4 percent. In terms of per capita income, an increase of 11.33% has been registered, which is more than the national average'. Dhami said that after the end of the 'Industrial Concessionary Package' in 2010, the state government is facing difficulty in the light of the 'locational disadvantage'. 'Due to difficult geographical conditions and other practical difficulties, the participation of private sector in important sectors like education and health is very limited in the hilly areas of the state. Due to this, special budget provisions have to be made for these sectors,' he said. He said that Uttarakhand is a state highly sensitive to natural disasters. 'The state needs continuous financial support to effectively deal with these disasters and for relief and rehabilitation work,' he said, also requesting FC to consider providing special grants for these special efforts of water conservation. Dhami said that due to the rules implemented as a result of declaring Ganga as a national river, the possibilities of hydroelectric power generation in Uttarakhand have become limited. 'The hydroelectric sector is not able to make the expected contribution to the economy due to various reasons, due to which there is a huge loss in the field of revenue as well as employment. I also urged GC to determine the amount of compensation for the affected projects and the related mechanism', he said. Dhami said that due to the 'floating population' coming to the pilgrimage sites, additional infrastructure has to be developed for transportation, drinking water, health, waste management and other services. 'Keeping in mind the high cost of building infrastructure in the state due to complex geographical conditions, special assistance should also be provided to the state. The chief minister said that along with tax effort, 'fiscal discipline' should also be included as a component in the 'devolution' formula for tax sharing in the norms under tax-sharing. 'It would be reasonable to implement 'Revenue Need Grant' in place of 'Revenue Deficit Grant'. 'Due to the geographical structure of the state, both capital expenditure and maintenance costs are high. The credit-deposit ratio in the state is also low,' he said. Panagariya said the per capita income of the state has increased. 'Good work is also being done in the state towards reducing unemployment. In view of the difficult geographical conditions, the challenges faced by Uttarakhand and other hill states will be discussed at a wider level to find solutions to them. The 16th Finance Commission has set a target to make its report available to the Central Government by 31 October 2025'.
Hindustan Times
02-05-2025
- Business
- Hindustan Times
PM Modi to relaunch construction works at Amaravati
Prime Minister Narendra Modi will relaunch the works for the construction of Amaravati, capital city of Andhra Pradesh, besides laying foundation stone for various projects across the state, all worth ₹57,962 crore on Friday, an official statement said on Thursday. According to the official schedule released by the state government, the PM will land at Vijayawada airport at Gannavaram at 2.55 pm. He will be received by chief minister N Chandrababu Naidu, deputy chief minister Pawan Kalyan and senior officials. 'From there, Modi will fly down to Velagapudi in Amaravati by helicopter by 3.15 pm. After the ceremonial reception, he will arrive at the public meeting venue at 3.30 pm and participate in the foundation-laying and inaugural events, before returning to Gannavaram airport by 4.55 pm to department for New Delhi,' it further stated. In one of the largest single-day infrastructure announcements for the state, the Prime Minister will lay the foundation for and inaugurate a total of 94 projects worth ₹57,962 crore. These include capital city institutions, national highways, railway upgrades, and defence-related installations, the schedule said. The CMO statement said at Amaravati, the Prime Minister will lay the foundation for 74 projects worth ₹49,000 crore, including the construction of the assembly, secretariat, high court, and judicial residential quarters. Besides, Modi would virtually kick start the works for nine central projects, worth ₹5,028 crore, including Defence Research Development Organisation (DRDO)'s missile testing centre at Nagayalanka worth ₹1,459 crore; Unity Mall at Visakhapatnam worth ₹100 crore; Guntakal-Mallappa Gate rail overbridge worth ₹293 crore and six new national highway projects worth ₹3,176 crore. Besides, the Prime Minister will inaugurate eight completed national highway projects worth ₹3,680 crore, three railway projects worth ₹254 crore. The CMO statement said Modi's visit would be a turning point in the developmental narrative of Andhra Pradesh. After nearly a decade of uncertainty surrounding the capital, Modi's presence in Amaravati to relaunch capital construction will send a powerful message of political stability, Centre-State coordination, and governance renewal, it said. The state government has made elaborate arrangements for the Prime Minister's visit, with public participation expected on a large scale. The event is being projected as a decisive moment for the future of Amaravati and a clear signal of renewed momentum in Centre-State cooperation.
