Kerala ready for second round of fight for fiscal federalism

Maharashtra too is expected to join the movement that had the cooperation of six other States

Roping in Maharashtra along with other Opposition-ruled States, Finance Minister T.M. Thomas Isaac is further upping the ante against the Centre for securing the Goods and Services Tax (GST) compensation and other transfers to tide over the deepening financial crisis.

Enthused by the response from the initial round of consultations involving six States including Punjab and West Bengal for its fight for fiscal federalism, Kerala is now taking the lead for the second round on Monday. Maharashtra, too, is expected to join the movement. Maharashtra Chief Minister Uddhav Thackeray had recently raised a bogey for releasing Central transfers, including GST compensation of ₹15,558 crore, due to the State.

With Mr. Thackeray throwing down the gauntlet, the movement has gained greater momentum and is likely to put the National Democratic Alliance (NDA) government under duress. The video-conferencing session on Monday would iron out a strategy to take on the Centre and the first stage would be the GST Council meeting on December 18.

Since the council has an inbuilt complaints redressal mechanism, the non-BJP ruled States would first flag the crisis heralded by the recession and also how the delay in releasing the GST compensation has further compounded the crisis. If the Centre resolutely cold shoulders and refuses even to acquiesce the demand, the collective will move the Supreme Court to press their case.

For the alarming fall in tax collection, 12% against the 30% target set by the government, the tax concessions offered by the Central government to the corporates and the decision to repeatedly defer the dates for filing the annual returns have all aggravated the crisis beyond repair.

According to Dr. Isaac, the expenditure has touched 16%, but the tax collection was lingering between 11% and 12%. A similar situation prevailed during the last three years of the United Democratic Front (UDF) government too. But then, the rate of expenditure was only 14%.

“The postponement of date for filing annual returns has virtually crippled the tax collection and scrutiny mechanism. To zero in on instances of revenue leakage, false input credit, and such others we need data. Once the returns are filed by this month, the government would be armed with data and we will take on such cases,” he says.

The political move to bring together other States is expected to bolster the bid to put the Centre under pressure, while bridging the gaps in revenue collection in the State.