Here is why Tamil Nadu CM Jayalalithaa does not want GST

CHENNAI: As Tamil Nadu Chief Minister J Jayalalithaa's renewed slant towards welfare and reluctance to support the Goods and Services Tax becomes prominent, experts in the state worry about the future. Economists and observers believe Tamil Nadu runs the risk of being forced to increase its borrowing and hit the fiscal-deficit ceiling to fund a ballooning budget for welfare schemes from free laptops to low-priced food canteens as the proposed GST will take a significant chunk of Own Tax Revenue ( OTR) for the manufacturing state.

"If Tamil Nadu takes up GST, they may have to either borrow money or give up some of the schemes. While it will be tough to say which route the state will take, it is for sure the GST in its current form will significantly add to the state's revenue deficit," said professor KR Shanmugam, former director of Madras School of Economics. According to a study done for the state commercial taxes department by economists from the Madras School of Economics, Tamil Nadu stands to lose Rs 9,270 crore a year upon implementation of the GST.

The government gets well over 70% of state's OTR ­ primarily through sales tax and state VAT ­ which was estimated at Rs 95,531 crore in the interim budget presented in February .

Being a hub of manufacturing with clusters of textile, automotive, leather and pharmaceutical factories, Tamil Nadu consumes relatively lesser than it manufactures, meaning it will lose revenue as the GST law shifts points of tax levy from origin to where the good or service is utilised.

"Due to the new GST procedure, more dealers are going to be ex empted from taxation, the central sales tax will be slowly phased out and so will Tamil Nadu's inherent nature of being a producing state," he said.

In hailing of the progress of the GST law as a landmark move in the country on Tuesday , finance minister Arun Jaitley said Tamil Nadu was the lone state not on the wagon yet.

In her meeting with PM Narendra Modi, Jayalalithaa said the pricky issues were the GST Council impacting state autonomy on its finances and pushed for the centre compensating all of its revenue loss.

He added Tamil Nadu's fears are well-founded owing to clash with the Centre over the revenue loss.The empowered group of finance ministers put the revenue loss at just Rs 2,000 crore.