NewDelhi: With West Bengal Chief Minister Mamata Banerjee rejecting the Centre’s suggestion Today that the states can borrow to meet the GST (Goods and Services Tax ) Revenue shortfall, Chief Ministers in states including Kerala, Tamil Nadu and Punjab have already expressed their dissent over the Goods and Services Tax (GST) shortfall compensation. Mamata Banerjee in her letter said the GST shortfall compensations are equal to the betrayal of trust and moral responsibility of the government towards the states. She alleged ”the action an attack on the Federal structure of the country. The Centre passing on its constitutional obligations.of meeting the revenue gap to the states’.
Miffed at the Centre’s two burrowing options over the intervention on the issue of the Goods and Services Tax shortfall compensations, Chief Ministers of the opposition ruled states have expressed their dissent to the Centre. One of the options offered by the Centre was for the states to burrow Rs 97,000 Cr from a special Central facility to meet the shortfall due to the transition to the GST regime, with repayment and of the principal and interest to be serviced by the compensation cess. The alternative is to borrow Rs 2.35 lakh Cr, the estimated shortfall on the account of the GST transition and COVID 19 induced slowdown from the market, facilitated by the centre and the RBI.according to the Centre’s version, the state would bear the interest burden while the principal would be serviced by the compensation cess. Such taxes are levied on sin and luxury products such as cigarette and specified categories of automobiles. Andhra Pradesh, Tamil Nadu and Odisha are likely to join Delhi, Punjab, Kerala, West Bengal, Chhattisgarh, Jharkhand, Maharashtra, Rajasthan and Puducherry in rejecting the options and asking the Centre instead to borrow and compensate the states.
Besides Mamata Banerjee, the chief ministers in the states, Kerala, Tamil Nadu Punjab and Chathisgargh have written a letter to the Centre expressing their defiance over the matter. Kerala Chief Minister Pinarayi Vijayan asked in his letter to the centre to revoke the two borrowing options for the states in the GST offered by the Centre.
”I write this letter to convey the concerns of the Government of Kerala with regard to the hurdles in the payment of Goods and Services Tax (GST) compensation to the States. When GST was implemented it was agreed upon that the States would be assured of an annual compounded growth rate of 14 per cent in GST revenue with 2015-16 as the base year during the initial five years of implementation,” Kerala Chief Minister wrote. Vijayan points out in the letter that section 7 of the GST Act shall be payable to the states and that will be calculated and issued at the end of every month and said since 2019 -20 this provision has not adhered to”.
Tamil Nadu Chief Minister Edappadi K Palani Swami wrote, ”states are being required to borrow from the market…is administratively difficult to implement and more expensive. Further, the reasons being cited for such an arrangement are not persuasive”, he sought unpaid dues of 12, 250 .5 Crore.
Pu8njab has sought more clarity over the matters that the Attorney General K K Venugopal’s opinion on compensation cess provided to the states was based on inadequate information. The Finance Minister Manpreet Badal said, ”the minutes of the 5th and 8th and 10th GST Council meetings where it was discussed that the Central government could raise resources by other means, including market burrowing, for compensation, and this could then be recouped by the continuation of cess beyond five years”.
Chhattisgarh Chief Minister Bhupesh Bhagel and Commercial tax minister TS Singh Deo asked to provide Rs 2,828 Cr of unpaid dues to the states. Besides, Chhattisgarh said that ”since its delicate matter and the entire federal structure of the is at stake.” the state would prefer to seek legal opinion over the matter.
In 2017, the first Narendra Modi government implemented GST with an aim to reform tax in the country to a unified form, with one nation one tax vision. The GST replaced multiple indirect taxes that were levied on different goods and services. The Central Board of Indirect Taxes and Customs (CBIC) is the regulatory body governing all changes and amendments regarding this tax.