Kejri writes to PM Modi over GST dues to states
Days after the Union government placed two options before states to meet their goods and services tax ( GST) revenue shortfall, Delhi chief minister Arvind Kejriwal, on Tuesday, wrote to Prime Minister Narendra Modi to consider a legally viable option to tide over the coronavirus induced economic crisis and that the GST council should consider authorising the Centre to borrow on its behalf and extend the period of collection of cess beyond 2022.
Mr Kejriwal said the “assurance of the GST compensation to states to meet the shortfall in GST collections is one of the pillars on which the entire GST edifice rests.”
The GST council had, on August 27, offered the states with two options to tide over their revenue shortfall as the GST cess collected from items such as cars and tobacco was not adequate to compensate them this financial year. The Centre specified that the states could either borrow from the Reserve Bank of India ( RBI) or from the market under different terms.
Terming the GST reform as the landmark reform in the indirect tax structure of India, Mr Kejriwal, in the letter, said: “All the states will overcome the unprecedented situation that the Covid- 19 pandemic has brought before the
country by working collectively.”
He said, “It is in the background that I would like to submit that the two options of borrowing presented by the ministry of finance, which primarily require the states to borrow and then meet the repayment liabilities, will put an extremely onerous burden on the states which are, as it is, reeling under the financial crisis due to the shortfall in the revenue collections and an increased commitment of expenditure emerging from Covid- 19 response.”
Mr Kejriwal also said that the options proposed by the Centre will lead to a cumbersome process of borrowing by the states, crediting the debt amount to the GST compensation fund.
“To create an artificial distinction between loss due to the implementation of GST and those owing to Covid- 19 pandemic goes against the very spirit of the Compensation Act and will lead to a creation of a trust deficit between the Centre and the states, wherein in the future the states will be hesitant in coming together to achieve more such larger common national goals as was done through the implementation of GST,” he said.
The Centre and non- BJP ruled states are at loggerheads over the financing of the ` 2.35 lakh crore GST shortfall in the current fiscal year.
On Monday, five non- BJP ruled states rejected the proposal mooted by the Central government in last Thursday’s GST council meeting that states could borrow to meet their current GST revenue shortfall.
The states agreed during a meeting of finance ministers of Punjab, Delhi, Kerala, Telangana, and West Bengal to reject both the borrowing options mooted by the Centre.