Release of the sum by the Centre is expected to address State’s revenue deficit

The Tamil Nadu government, which is facing a huge challenge of funding restoration and rehabilitation measures in districts hit by Cyclone Gaja in the midst of a growing problem of revenue deficit, is banking on the Centre to provide ₹8,684 crore, due to the State, under the Goods and Services Tax (GST) scheme for mitigating its “cash flow constraints.”

In the assessment of the State government, the figure is a sum of two components of the scheme — the Integrated Goods and Services Tax (IGST) settlement and the GST compensation.

If the amount is made available to the State government, the problem of revenue deficit can be contained to a large extent, said a senior official handling issues concerning commercial taxes. For the current year, the revenue deficit is estimated to be around ₹17, 500 crore.

A few days ago, Chief Minister Edappadi K. Palaniswami wrote to Prime Minister Narendra Modi, seeking his intervention in the matter and requesting him to provide “suitable instructions” to the Union Finance Ministry for the early release of funds to the State.

In respect of the IGST — where the proceeds are distributed equally between the Centre and the States — the claim of the Tamil Nadu government for the previous financial year (2017-18) comes to ₹5,454 crore. The State got ₹1,304 crore last year and ₹3,427 crore this year towards provisional or ad hoc settlement of IGST.

Absence of clarity

The State government also feels aggrieved over the “lack of authentic information” regarding the amount of IGST accumulated as of March 31, 2018.

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As for the GST compensation, Tamil Nadu has not yet been paid ₹455 crore for 2017-18. For the first half of the current financial year, it is entitled to get ₹2,775 crore. The principle governing the compensation is that the Centre should compensate States’ loss of revenue on account of implementation of GST for five years. Taking 2015-16 as the base year, the projected nominal growth rate of revenue subsumed for a State is 14%. As far as Tamil Nadu is concerned, the base year revenue is ₹29,786 crore.