Tamil Nadu Prime Minister Edappadi K Palaniswami
CHENNAI: Tamil nadu chief minister Edappadi K Palaniswami Monday placed the responsibility in the Center to “borrow” to make up for the GST deficit of the states.
In a letter to Prime Minister Narendra Modi, the Prime Minister said that the Center has a moral and legal obligation to pay compensation for the deficit in GST collections.
“Most states, particularly Tamil Nadu, agreed to implement GST and support legislation on the basis of the central government’s unequivocal commitment to compensate states for any loss of revenue. That compensation is clearly ensured in Law 101 of the Amendment of the Constitution and in the GST (Compensation to States) Law of 2017, ”Palaniswami said in his letter.
So far, no compensation has been released for the shortfall in revenue collection since April 1, 2020.
To date, a total sum of Rs 12,250.5 crore is owed to Tamil Nadu as compensation for the shortfall in GST collections, of which Rs 11,459.37 crore has been accumulated from April to July 2020, it said.
“As you know, states have suffered a severe loss of revenue from the Covid-19 pandemic and have also been at the forefront of the battle to prevent the spread of the disease,” he added.
“Our position has always been that the Government of India has a moral and legal obligation to pay compensation for the shortfall in GST collections. We had also indicated that it was up to the Government of India to find the necessary funds to compensate the states, including from the consolidated Indian fund, if there was a deficit in tax collections, “said CM Palaniswami.
The prime minister also expressed concern about the two options that have been offered to states after the GST council meeting on August 27.
“My first concern is that in the two options suggested by the Government of India, states are required to borrow from the market to cover the deficit in compensation due. This is administratively difficult to implement and more expensive, ”he said, adding that the reasons cited for such an arrangement are not convincing.
“Whether the government of India borrows or the state governments, for the rating agencies and others that monitor macroeconomic indicators, what is relevant is the overall government deficit and loans. The argument that states borrowing what is essentially an obligation of the Government of India is an apparently better optical arrangement does not appear to be a strong or valid reason. Therefore, I reiterate the Tamil Nadu government’s stance that the Indian government should advance funds to the GST offsetting ceasefire fund, if necessary, by borrowing on the market and servicing the debt through an extension of the foreclosure. compensation, “Palaniswami said, categorically upping the ante against the Center.
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