Tamil Nadu Finance Minister Thangam Thennarasu has called for strong safeguards to protect States’ revenue interests while implementing upcoming reforms to the Goods and Services Tax (GST) framework. Speaking at a policy review meeting, he stressed that federal principles must remain central to tax reforms to ensure fiscal stability for States.
The Minister highlighted that while GST has streamlined indirect taxation in India, States often face challenges with revenue compensation, particularly in times of economic slowdown. He urged the Centre to factor in State-specific concerns such as industrial incentives, regional development needs, and revenue loss from exemptions when finalizing the reforms.
Mr. Thennarasu also reiterated that any restructuring of GST slabs or rate rationalization must be approached cautiously, keeping in mind both consumer affordability and States’ financial health. He added that Tamil Nadu will continue to advocate for a balanced GST system that supports cooperative federalism while safeguarding the fiscal autonomy of States.
Key Highlights of the Minister’s Statement
Revenue Protection Priority: States must not face losses under GST reforms.
Centre-State Balance: Federal principles should guide tax policy decisions.
Compensation Concerns: Call for mechanisms to offset revenue shortfalls.
Cautious Rate Rationalization: Ensure affordability without harming State revenues.
Focus on Federalism: Advocacy for cooperative decision-making in GST reforms.
Who Should Take Action – Specific Advice
State governments should actively engage in GST Council discussions to ensure their fiscal interests are represented. Businesses must stay updated on proposed GST reforms, as changes in tax slabs or credits could impact pricing and compliance. Policymakers should consider designing flexible models that account for regional economic variations.
India Advocacy Insight
Tamil Nadu’s stance reflects the broader need for States to play a decisive role in shaping GST reforms. At India Advocacy, we believe that sustainable tax policy must balance national goals with regional fiscal realities. Protecting State revenues will be key to ensuring long-term stability in India’s federal financial system.
