GST eroding financial freedoms of States: K.N. Harilal

The introduction of the Goods and Services Tax (GST) regime has resulted in the erosion of the financial freedoms of the States, 7th State Finance Commission chairman K.N. Harilal has said.

Prof. Harilal was inaugurating a seminar on Centre and State Budgets jointly organised by the Public Policy Research Institute (PPRI), Institute of Parliamentary Affairs, and the Economics Department of the University College here the other day.

The situation where indirect taxes are unilaterally determined by the Union government usurps the financial manoeuvrability of the States. Other Central legislations such as the Fiscal Responsibility and Budget Management (FRBM) Act also impacted the spending capacity of the States.

The Centre’s reliance on cesses that need not be shared with the States have further encroached on their fiscal freedoms. Despite the GST rejig, the Central government’s revenue from GST has not witnessed an increase. All this points to a fiscal crisis taking shape in the country, Prof. Harilal said.

PPRI director Mohanakumar S. pointed out that the Central government had last increased the old age pension - from ₹75 to ₹200 – in 2006. Since then, the Centre has not announced any increase in the social security pension. The ₹500 monthly pension given to beneficiaries above 80 years from BPL families has not been hiked since 2011. Although 16% of the Kerala population are above the age of 60, only 1.3% receive the Centre’s pension amount, Prof. Mohanakumar said.

Institute of Parliamentary Affairs director general Biveesh U.C., Economics Department (University College) head Veena Ranjini and Centre for Development Studies director C. Veeramani also spoke.