4 states reject Centre’s options

KOLKATA: The Centre’s suggestion that states borrow to meet the revenue shortfall in the Goods and Services Tax (GST) has run into some turbulence with some states ruled by nonBharatiya Janata Party (BJP) parties rejecting both options presented to them. West Bengal, Kerala, Delhi and Punjab have all objected to the plan.

The two options presented are totally unacceptable because such a move will badly impact the financial health of states, West Bengal finance minister Amit Mitra said on Sunday, warning of what he called a “planned strategy to crush federalism”.

Mitra also said huge debt was being thrust on states in the name of an “Act of God” — a reference to the phrase used by Union finance minister Nirmala Sitharaman to describe the Covid-19 pandemic that she said had hit GST collections

.“Many people are worried and see this as a pattern. Once the financial health of states becomes shaky, the brute power of centralism will come into play. Is this the new ideology?” Mitra asked at a virtual news conference.

“At the GST Council meeting, 15 states, including some ruled by the BJP, said the states cannot be asked to borrow to make up for the shortfall in GST revenue collection as this will increase debt burden and [lead to] more expenditure. After the meeting, the Centre has sent us a written reply saying we have to borrow from the Reserve Bank of India (RBI),” Mitra, who was present at the meeting, said.

He did not name the states. Since the meeting of the GST Council last week, Kerala, Punjab, and Delhi all ruled by nonBJP parties, have expressed their discomfort with the plan, and asked the Centre to borrow to make good its commitment to the states. Delhi deputy CM Manish Sisodia termed the Centre’s move a “betrayal” of federalism.

HT learns that other states such as Maharashtra and Chattisgarh are also opposed to the plan.

Ahead of the GST Council meeting last week, Maharashtra CM Uddhav Thackeray suggested moving to the older tax regime because GST wasn’t working. The Centre has guaranteed states compensation for any shortfall arising from GST for five years starting 2017.

Annual revenue growth of 14% was assumed for this. This year, the finance ministry expects the compensation to be around ₹3 lakh crore, and says ₹65,000 crore can be met through the collection of cess on luxury and sin goods.