Opposition-ruled States will take a united stance to secure the eligible Goods and Service Tax (GST) compensation from the Centre.
Also read | Centre’s GST compensation options ‘betrayal of spirit of cooperative federalism’: Punjab FM
A meeting chaired by Kerala Finance Minister T.M. Thomas Issac and attended by the Finance Ministers of Punjab, Delhi, Chattisgarh, West Bengal and Telangana on Monday also decided to reject the two options for Goods and Service Tax (GST) compensation mooted by the Centre in the GST Council meeting on August 27.
Dismissing Union Finance Minister Nirmala Sitharaman’s theory of an unforeseen “act of God” , the Finance Ministers’ meeting noted that the States are eligible for GST compensation, and a 14% increase annually in the GST from the base year has been assured.
Dr. Issac said the meeting was of the unanimous view that the Centre should take loan and provide GST compensation to the States. “The compensation should be provided to the States through the Cess Fund. The GST council should decide on collection of the cess till the repayment of loan to be availed by the Centre.”
The Chief Ministers of the six States will convey the stance on GST compensation to Prime Minister Narendra Modi. This will keep the issue alive outside the GST Council, Dr. Issac said.
The Finance Ministers’ meeting, held through video conference, also decided to launch a campaign in the State to check the stance of the Centre on the payment of GST compensation.
Dr. Issac said another meeting would be held within three-four days.
Kerala was the first State to reject the two options and to press for the Centre availing loan to pay GST compensation to the States. Dr. Issac had said the proposals would lead to financial loss to the State. Moreover, the State could take only 3% of the its income as loan.
The first option was a special window to the States, in consultation with the Reserve Bank of India, for borrowing ₹97,000 crore at a reasonable interest rate. The hsecond option was to borrow the entire ₹2.35 lakh crore shortfall under the special window.
Addressing a press conference after the meeting, Telangana Finance Minister T. Harish Rao expressed unhappiness that the Centre was, with both options, trying to pay to the States a compensation of only ₹1.65 lakh crore, while the due 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, Mr. Rao said. There was no scope for denial of compensation due to natural calamities or COVID-19 in the legislation.
Mr. Rao warned the Centre that it had no option but to pay the compensation in full either on legal or moral grounds. He said that the Centre had “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”.
“Telangana government will not agree to the double standards at any cost,” he remarked.
Telangana had 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 had contributed ₹18,032 to the national exchequer crore towards cess, but got back only ₹3,200 crore.
(With inputs from Hyderabad bureau)
Published - August 31, 2020 09:08 pm IST
