Tamil Nadu CM Jayalalithaa fights Telangana, Andhra Pradesh welfare schemes

In a letter to Prime Minister Narendra Modi, Ms 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 the 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, Ms Jayalalithaa said 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 the value added tax regime which constituted the earlier sales tax regime at the 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, Ms Jayalalithaa stated that almost all the CMs had favoured the scrapping of such exemptions during the National Development Council meet in June 2005.