NEW DELHI : The governments of Rajasthan, Kerala, Delhi, Punjab and West Bengal on Wednesday urged the Centre to immediately pay them the guaranteed compensation for their Goods and Services Tax (GST) revenue loss for August and September, which they said they have not received.
Finance ministers from these five states told reporters here that they were facing financial pressures because of the delay in compensation payment, the first since GST’s roll-out in July 2017. They also demanded a dispute resolution mechanism which they could approach in such cases.
The demand highlights growing friction between the Centre and some state governments over fiscal matters in the backdrop of a fall in revenue collections because of the downturn in economic growth.
To be sure, although these five are ruled by non-Bharatiya Janata Party governments, they are among a large number of states that are facing GST shortfalls from their revenue targets.
Punjab finance minister Manpreet Singh Badal said the central government owes his state ₹4,100 crore in ₹2,100 crore of compensation for the two months and past arrears. “States have to run health services, education, police and social security. These things cannot wait. If the compensation doesn’t come, I will be in overdraft. We would like to see if it can be released immediately. If this is left to the fancy of the central government, there should be a dispute resolution mechanism to ensure that we are able to get what rightfully belongs to us," Badal said. The minister said that having to borrow more for paying salaries was grossly unfair on the state.
State governments are also awaiting the Fifteenth Finance Commission’s (FFC) report expected later this month for sharing of the central government’s tax revenue with states, hoping that the new formula that will be in effect for five years from April 2020 will benefit them. FFC chairperson N.K. Singh on Monday said the overall tax buoyancy—the rate of tax revenue growth over economic growth—was “woefully short of expectations." In the first half of the fiscal ending September, the central government collected around 42% of its targeted ₹19.6 trillion for the full fiscal.
States are constitutionally guaranteed that any revenue shortfall from an agreed benchmark will be made good by the Centre for the first five years of GST, which end in 2022. States suspect that the economic slowdown and the corporate tax rate cut announced in September have together dented the central government’s finances and that this is now getting reflected in the delayed compensation payments.
Kerala finance minister Thomas Isaac said the state is supposed to get around ₹1,600 crore in GST compensation. Normally in such circumstances, states will frontload their borrowings and fill the gap but there is no fiscal space for Kerala to borrow in the present quarter, the minister said. “How will state finances work? This is a Centre-engineered crisis," said Isaac. Delhi deputy chief minister Manish Sisodia, who also holds the finance portfolio, said the Centre owes the state ₹2,355 crore, which he said, was a big amount for the state. “If there is such a shortfall, salary payments will get affected. This is happening with all states," said Sisodia.
GST compensation is an important source of funds for all states, 60% of whose revenues come from GST. West Bengal finance minister Amit Mitra said states were in a precarious situation. “We thought of making an appeal to Union finance minister that she must personally look into it and not violate Constitutional provisions as passed by the Parliament of India. All the states are in distress," said Mitra.
Published On : 21-11-2019
Source : Live Mint
