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Southern states bank on special packages

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The Tamil Nadu government wants a constitutional amendment to transfer the power of levying service tax from the Centre to the States. In neighbouring Karnataka, chief minister HD Kumaraswamy's top priority is a special package in the budget for Bangalore. Tamil Nadu currently spends Rs 4,304 crore annually on the freebies the DMK had promised during its election campaign: cheap rice, free colour television and gas connections, and the annulling of co-operative loans. The demand for transfer of the service tax is in fact a desperate plea by the DMK for help to overcome its financial crunch.

Senior officers, however, are sceptical, of any such amendment coming through. At present Tamil Nadu’s share from the service tax collections is 30.5 per cent of the central pool. Even if powers are not transferred, the state hopes the centre will increase its share to 70 per cent since the state is one of the leading contributors of service tax, being home to a booming BPO sector. Tamil Nadu was also one of the first states to implement VAT. Officials noted that the centre had promised a larger share of the service tax for states that had implemented VAT, but nothing extra had come so far.

Karnataka’s primary demand is also being justified on the strength of Bangalore’s contribution to information and technology (IT). The city is home to 1,500 leading IT firms, both local and foreign, employing about 350,000 people and accounting for 36 per cent of the country’s IT export revenue — $ 8.3 billion (Rs 37,350 crore) — in the last financial year.

“We expect the Centre to make a special announcement for Bangalore — it could be a financial grant or aid in the form of a package.The state has been making attempts to solve the city’s problems. But we need a matching support from the Centre to retain the global tag of the city. Last year, we were expecting relief to Bangalore, but were disappointed. This year, I hope the Centre treats Bangalore not just as a state capital, but as an National IT destination in its budget, " said chief minister HD Kumaraswamy.

Tamil Nadu also wants at least a token allocation for the linking of the rivers in the southern peninsula, which the state feels would kick-start the ambitious project. While Andhra is already embarked upon a major project to link Rivers Godavari and Krishna, a push from Delhi it feels has become essential to get other states like Orissa (Mahanadhi), Karnataka(Cauvery and Thungabadra) and Kerala to agree.

Karnakata in turn wants more attention paid by the centre to the arid zone of North Karnataka. " Special status has already been granted to similar areas like Maharashtra's Vidarbha and Andhra Pradesh's Telangana region.

According such status to the North Karnataka region will not only help financial growth, but will also assist economic well-being of the region," said Kumaraswamy.

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