Nirmala Sitharaman Denies Centre-State Friction Over GST

Union Finance Minister Nirmala Sitharaman refuted any claims of "friction" between the Centre and states regarding the goods and services tax and underscored the importance of respecting the federal structure within this economic reform.

Addressing a meeting on The Finance Minister's Insight: Path Forward, organised by the Revenue Bar Association in Chennai, Sitharaman highlighted that simplifying tax compliance for taxpayers takes precedence over revenue generation in union Budget discussions.

"Revenue is the last consideration with which every budget meeting happens. You may think that I am not telling the truth. The hard truth I would like to put before you. Yes, we like to raise revenue. During several consultations, including those with Prime Minister Narendra Modi, revenue raising came last. But, simplifying, easing and compliance of taxpayers came first," Sitharaman explained.

Sitharaman pointed out that the average GST rate had decreased to 12.2% by 2023, significantly lower than the originally suggested revenue-neutral rate of 15.3%. "We did see how much of effort happened at ground level to bring one nation-one taxation," she said.

On a charge in certain quarters on one of the biggest economic reforms in India, Sitharaman said: "I completely deny that there's a lot of friction in GST relationship with states...The Centre is not extracting revenue from states."

The federal structure in the GST framework has to be respected so that both the Centre and states could work together to promote developmental activities besides widen the tax base, she said. "That's the spirit with which we are working."

The spirit of revenue generation for both Centre and states should be to see how evasion could be avoided or targeted, how this should be addressed, and compliance ensured by making people think it is better and easier to comply than to evade, she said.

Finance ministers representing various states attending the GST council meeting spoke on how to facilitate greater simplification, greater rationalisation and revenue generation. "So, for those who all want to believe that discordant notes guide finance ministers' meeting, I would like to say that's the place where the least politics works," she said.

Every finance minister wanted good revenue generation and to widen the tax base. "And when he goes back to his constituency he should be able to answer people that we are not extracting revenue which is not justified," Sitharaman added.

(With inputs from PTI)