Six States forge unity on GST compensation

T Harish Rao   | Photo Credit: MohdArif

Six State governments, including Telangana, on Monday bounced back the Centre’s offer made to them to borrow loan and meet their GST compensation in view of shortfall in collections due to the COVID-19 pandemic.

At a video conference of Finance Ministers, Telangana apart, West Bengal, Kerala, Chhattisgarh, Delhi and Punjab governments, arrived at a consensus that the Centre should borrow loan instead of asking the States to do so and pay them the compensation. The governments also rejected the two options put forward at the recent GST Council meeting, asking them to borrow the ₹ 97,000-crore shortfall arising out of GST implementation or ₹ 2.35 lakh crore which is their compensation requirement in the current year due to faltering of collections.

Addressing a press conference after their meeting, Telangana Finance Minister T. Harish Rao expressed unhappiness that the Centre was by both options trying to pay to the States a compensation of only ₹ 1.65 lakh crore while the dues to them towards compensation was ₹ 2.35 lakh crore and ₹ 65,000 crore from levy of cess. The GST Act was clear that the compensation was to be met in full if the growth rate of States was below the threshold level of 14%. In the name of ‘Act of God and coronavirus’, the Centre was denying them ₹ 1.35 lakh crore. There was no scope for denial of compensation due to natural calamities or COVID in the legislation. The same was the view expressed by the Attorney General of India.

Mr. Harish Rao warned the Centre that it had no option but to pay the compensation in full either on legal or moral grounds. He wondered that the Centre conveniently deposited the surplus in cess distribution to the Consolidated Fund of India in the last three years of GST implementation, but now asked the State governments to bear the loss. Revenues generated by levy of cess should go to States as their matter of right.

“Telangana government will not agree to the double standards at any cost,” he remarked. Telangana suffered a revenue loss of 34%, amounting to ₹ 8,000 crore, in the last four months due to the pandemic. On the other hand, the State contributed to the national exchequer ₹ 18,032 crore towards cess, but got back only ₹ 3,200 crore.

Mr. Harish Rao recalled that Telangana was hesitant to join the GST regime when it came into force in 2016-17 as its growth rate was 22%, which was 8% above the threshold level. Had it not joined, the State would have been richer now by ₹ 25,000 crore. It joined the regime for the national cause to ensure tax liberalisation and attract investments. Telangana opposed GST even when it was conceived in the UPA government because the then regime ditched the State in the share of Central Sales Tax to the tune of ₹ 3,647 crore.

On the other hand, the NDA government offered to pay to better performing States even when the cess fund was less. So, both governments undermined the rights of Telangana. The Centre enjoyed free hand in raising resources through increased borrowing limits, cess or tax revenue but condemned States to borrow and get less from cess. This was totally unacceptable, he said and added that the six States had decided to launch legal battle, if needed, in the ends of justice.

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Printable version | Oct 29, 2020 9:27:50 AM |

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