Center and states are fighting over Rs 2.35 lakh crore owed in GST and Covid compensation (file)
New Delhi:
Top ministers from six states not governed by the BJP have written to the center to remind it of their “constitutional” responsibilities in the standoff over the Rs 2.35 crore deficit in GST compensation and financial aid (from the pandemic) due to state. Mamata Banerjee (Bengal), Pinarayi Vijayan (Kerala), Arvind Kejriwal (Delhi), Edappadi K Palaniswami (Tamil Nadu), K Chandrasekhar Rao (Telangana) and Bhupesh Baghel (Chhattisgarh) rejected the refund options, indicating that the states they borrow to make up fees. – and reminded the center that it had a legal obligation to reimburse the states’ lost revenue in the first five years of the GST regime. They said that if states were to borrow, the repayment programs would put an additional burden on their finances. The center, they said, could shoulder this burden and repay the loan by shifting GST tax collection beyond 2022.
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In her letter, Ms Banerjee said that the “GST mess” amounted to a “betrayal” of trust, a point also made by Kerala Finance Minister Thomas Isaac between the center and the states. He reminded Prime Minister Narendra Modi that “… in December 2013 … the only reason the BJP was opposed to the GST … was because they did not trust the government of India to honor the GST compensation to the states”. “Today (those) words ring true in our ears as we are losing our trust in the central government of the BJP,” wrote the Chief Minister of Bengal.
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Ms. Banerjee noted that the center’s payment options required states to borrow money at a time when many are unable to pay salaries to employees. The center, he said, was in a better position to borrow, as it would incur a lower interest rate than the states. She said the government could raise resources, while states “cannot pay huge additional debts when their finances are on the brink of collapse.”
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The Chief Minister of Kerala said that transferring the GST compensation obligation to the states through loans was not in accordance with the spirit of understanding between the center and the states on this issue. Referring to comments from Union Finance Minister Nirmala Sitharaman during last week’s GST Council meeting, she said: “It can be kindly (pointed out) that the loss of revenue and spending pressures have been greater for the states”.
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Like his counterparts, Mr. Vijayan also reminded the center that “it was agreed that states would be assured of a 14 percent compound annual growth rate in GST revenue … for the initial five years.” “Since April 1, 2020, no compensation has been provided to the states,” he added.
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Delhi Chief Minister Arvind Kejriwal wrote: “… an extremely onerous burden on States … reeling from the financial crisis due to shortfalls in revenue collection and increased COVID-response spending commitment. 19 “. Mr. Kejriwal also said that the guarantee of compensation to cover the shortfall in collections was one of the pillars on which the entire GST building rested.
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“… states are required to borrow … to make a good deficit in compensation … this is administratively difficult … and more expensive,” said Tamil Nadu Chief Minister Edappadi K Palaniswami, whose party is allied with PM Modi’s BJP, he said in his letter. Macroeconomic indicators count “the deficit and indebtedness of the general government in general” and not who borrowed, he said in response to concerns about large-scale loans.
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Telangana Chief Minister K Chandrasekhar Rao, or KCR, echoed Ms Banerjee’s concern about federalism and wrote: “The center is abdicating its responsibility to compensate the states …” KCR, which had supported the GST regime with the national interest in mind, noted the The center had earned Rs 2 lakh crore from a tax on petroleum products that had prevented states from increasing VAT on gasoline and diesel.
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“You are well aware that according to constitutional provisions, the center is responsible for providing compensation to the GST,” wrote Chhattisgarh Chief Minister Bhupesh Baghel.
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Last week, the Union Finance Minister Nirmala Sitharaman said that the pandemic, which she described as an “act of God”, had hurt GST collections. She said the total deficit for fiscal year 2021 was Rs 97,000 crore and, including compensation due to the pandemic, states were owed Rs 2.35 lakh crore.
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The center said that these fees would be settled, but also that it wanted to avoid “avoidable loans … when it can be done at the state level.” Instead, he said states could borrow from markets. The states said this would affect tax revenue after 2022 as they would have to repay loans from future collections.
With contributions from ANI, PTI
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