Tamil Nadu Finance Minister Thangam Thennarasu on Wednesday voiced opposition to the proposed rationalisation of Goods and Services Tax (GST) rates, cautioning that lowering tax slabs would erode the financial resources of States.
Speaking at a meeting of the Group of Ministers on GST rate restructuring in New Delhi, Thennarasu insisted that any reduction of rates must be accompanied by measures to safeguard State revenues. He urged the Centre to extend the Compensation Cess for at least another four to six years to offset the potential losses from rationalisation.
The minister argued that withdrawing the cess while reducing tax rates would severely impact States such as Tamil Nadu, which are implementing large-scale welfare and infrastructure programmes. “If it is not possible to continue the cess on the goods taxed now, alternative mechanisms should be put in place to prevent loss of revenue to the States,” he said, according to an official release.
Thennarasu also demanded that the net borrowing ceiling for States be raised to 4% of Gross State Domestic Product (GSDP) without conditions. While welcoming reforms in principle, he stressed that protecting the fiscal autonomy of States should remain the priority.
The DMK government has repeatedly argued that rationalisation of GST, though framed as benefiting the common people, risks draining State treasuries unless backed by an assured compensation mechanism.
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