Chennai: Chief Minister Jayalalithaa on Monday urged the Centre to adopt a cautious approach to the complex issue of providing area based tax concessions to Telangana and Andhra Pradesh for economic development of the two states as it could shift investments from TN to the new states.
In a letter to the PM, Jayalalithaa said that such exemptions would shift investments from states with a strong infrastructure and trained manpower to other states motivated just by tax relief.
“The Andhra Pradesh State Re-organisation Act 2014, already contains a substantial and significant economic package. Hence, I urge you to adopt a cautious approach in providing area based tax concessions in the name of encouraging economic development. Such exemptions run counter to one of the basic thrusts of economic reforms. It will undo two decade long work of rationalisation of tax structures,” the Chief Minister stated.
Pointing out that the general direction of taxation reforms in India has been towards rationalisation and simplification of various exemptions, Jayalalithaa said that a conscious attempt has also been made at harmonising indirect tax rates among states and to eliminate harmful tax competition. “This led to the introduction of value added tax regime which constituted the earlier sales tax regime at state level. The Centre has also, over the last two decades, attempted to reduce and eliminate various exemptions,” she said.
Highlighting the spirited debate that took place on the issue of introducing area based exemptions from income tax and central excise to new industrial units in Himachal Pradesh and Uttaranchal in 2003, Jayalalithaa stated that almost all CMs had favoured the scrapping of such exemptions during the meeting of the National Development Council held in June 2005.
“Any extension of such area based concessions to Andhra Pradesh or Telangana will cause a huge flight of capital and relocation of industries in particular from neighbouring states. It would also make the neighbouring states totally uncompetitive,” Jayalalithaa said.
