HYDERABAD: The State government on Monday raised its voice against the ‘unhealthy’ tax regime of the Central government and demanded that the system of collecting ‘cesses’ and ‘surcharges’ by the Central government should be scrapped, to enable the State get more tax devolution from the Centre.

Finance Minister T Harish Rao made this demand while participating from Hyderabad, along with State government advisor (Finance) GR Reddy and Principal Finance Secretary K Ramakrishna Rao, in a virtual pre-Budget meeting conducted by Union Finance Minister Nirmala Sitharaman from Delhi. The State government has been opposing the cesses and surcharges being collected by the Centre. The State is heavily losing money due to the cesses and surcharges.

As per Article 270 of the Constitution of India, the cesses and surcharges would not form part of the divisible pool of taxes and the Centre need not share the same with the State governments. Thus, the States are losing huge chunk of revenues, especially when they are facing financial problems due to Covid-19. The cesses and surcharge revenue of the Central government is `3,70,218 crore in 2020-21 (Budget estimate). The cesses and surcharge revenue of the Centre was just `91,700 crore in 2012-13 and it was `1,15,800 crore in 2014-15.

The cess and surcharge on petrol was `12 in April, 2017 and it was increased to `30 in May, 2020. The cess and surcharge on diesel was `6 in April, 2017 and it was increased to `27 in May, 2020. Once, these cesses and surcharges are scrapped and included in the taxes, then the States would get more funds from the Centre.

During Monday’s video conference, Harish Rao pointed out that the cesses and surcharges being collected by the Centre were not being passed on to the States as part of tax devolution. “Because of this, the States are at the receiving end and losing huge revenues. The cesses and surcharges should be scrapped. Ensure that the States get higher tax devolution from the Centre,” he demanded.

Harish: Release grants as per FFC

Harish Rao urged Nirmala Sitharaman to follow the tradition of releasing grants recommended by the Finance Commission. “As the Centre did not implement the Fifteenth Finance Commission (FFC) recommendations, the State did not get `723 crore in 2020-21 Budget year,” Harish Rao said.

He also requested the Union Finance Minister to release `723 crore. Harish Rao demanded that the Finance Commission’s recommendations on devolution of grants to the States should be implemented as it is. He also demanded that the Union Finance Minister continue the additional borrowing permission — two per cent of the GSDP of the State, given for this year due to the Covid-19, and extend it to 2021-22 Budget year too. He demanded this as the State government had to encourage public investment in the State. Harish Rao also urged Sitharaman to release Backward Regions Grant Fund (BRGF) as assured in the AP Reorganisation Act, 2014. “The dues of BRGF to the tune of `900 crore should be released to the immediately,” he said.

Stating that the interest subvention scheme for women self help groups is being implemented in 50 per cent districts in the State, he requested the Union Finance Minister to extend the scheme to all the districts. Harish Rao also urged the Minister to provide Covid-19 vaccine free of cost across the country. He also urged the Centre to increase the amount being given under National Social Assistance Programme.