GST: States have been asking the center to pay their taxes on goods and services
New Delhi:
In a letter to states, the center promised it would eliminate its GST quotas despite the massive shortfall in GST tax collections amid the coronavirus pandemic, a situation that has been described as “an act of God” for Finance. Minister Nirmala Sitharaman. In the letter, the government said it wants to steer clear of “avoidable loans at the central level when it could be done at the state level” as central revenues are under “great pressure” due to the pandemic.
The Union Secretary of Finance and the Secretary of Expenditure will hold an online meeting on September 1 to answer queries from states about two options that the center has proposed: the first is that states will not have to pay the debt or pay it from other sources, and the second is that states will not have to repay the principal amount from any other source.
“The Government of India supports the statement of (former Finance Minister) Shri (Arun) Jaitley and is actively working with the states to reach such an agreement. The Government of India will support the extension of the compensation rate during as long as it can. Any compensation backlog will need to be fully settled, “the center said in the letter.
The GST Council, which makes national fiscal policies, after a meeting on August 27 gave the two options and asked the states to make a decision within a week.
The center is hard-pressed to pay GST fees to states that haven’t earned much this year due to the months of lockdown required by the COVID-19 crisis. Punjab, for example, has said that it may experience a revenue shortfall of Rs 25 billion this year. Haryana has also complained that she used to get the maximum income from taxes before the GST was introduced in July 2017.
“The prevailing economic situation is such that central revenues are under greater pressure than GST revenues. Direct taxes on wages and salaries are also severely affected. Customs revenues are also affected by the slowdown in imports. Central spending is affected not only by the response to the pandemic but also by national security needs. This is a national issue, not just a central government issue, “the center said.
“Therefore, it is in the collective interest of the center and the states, and in the interest of the nation and all economic entities, including the private sector, not to make any avoidable debt at the central level when it could be done at the state level,” the government said in the letter.
“This year, the Indian economy, and even more so the world economy, is suffering an exogenous shock, namely the COVID-19 pandemic, the scope and scale of which is unprecedented in history. Parliament obviously could not have contemplated a historically unprecedented situation of huge revenue losses from the bottom up, arising from an act of God quite independently of the GST implementation, affecting both central and state revenue, direct and indirect. However, the operational sections of Section 7 do not make such a distinction. Compensation is paid for the entire deficit (even if not for the implementation of the GST). This position has been clarified by the Attorney General and is accepted by the central government “, said the government .
The state can choose either option, after which its compensation, borrowing and repayment will be discussed, the government said. However, the options are applicable only for the deficit in the current fiscal year or 2020-21.
The deficit in GST collection is Rs 2.35 lakh crore for fiscal year 2021, the government said on Thursday.
Under the law governing the GST, states have been guaranteed payment for lost income in the first five years since the GST went into effect on July 1, 2017. This means that states were promised compensation for any revenue shortfalls through 2022, if they fell below the 14% annual growth since July 2017.
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