States seek GST compensation cess for five more years

Several states have asked the Centre to extend the GST compensation cess regime by two to five years, as they find that their economies are still in bad shape due to the pandemic. The states also wanted the Centre to clear the pending dues.

States, including Chhattisgarh, West Bengal, Delhi and Tamil Nadu sought an extension of GST compensation while attending the pre-budget consultation of state ministers with finance minister Nirmala Sitharaman.

According to Chhattisgarh chief minister Bhupesh Baghel, there has been a loss of revenue to the states due to the GST tax system and the Centre has not made arrangements to compensate the loss of revenue of about Rs 5,000 crore to the state in the coming year. So the GST compensation grant should be continued for the next five years beyond the June 2022 cutoff period.

Rajasthan education minister Subhash Garg also asked for an extension of the compensation cess window till 2026-27. West Bengal pitched for extension of GST compensation for another five years, citing two years of difficult time due to Covid-19.

"The Union government should extend the period of compensation by at least two years beyond June 2022 and also request the immediate release of the pending compensation of Rs 16,725 crore," said Tamil Nadu finance minister Palanivel Thiagarajan.

"Many states have asked for this. We have also asked to extend GST compensation. If it is not extended, the finances of many states will be in a bad shape," Delhi deputy chief minister Manish Sisodia said.

The ministers also asked the Centre to clear the pending dues to the states. There are pending dues from schemes shared between the Centre and states, performance grants from 2017-18 to 2019-20 and the basic grant for 2019-20 under the 14th Finance Commission. These dues have a considerable impact on the fiscal calculations of the states, which are already under severe stress due to the pandemic, they said.

"As per the CAG Report of 2016, the Union Government has not acted to devolve an amount of Rs 81,647.70 crore between 1996-97 and 2014-15 to the states," said Thiagarajan.

Further, the states also wanted the Centre to increase its share in the centrally sponsored schemes. "Our most significant demand is that the Centre's share in centrally sponsored schemes has gradually reduced and states' share has increased. Earlier share would have been 90-10 and now it is 50-50 or 6040. Our request is that it should go back to 90-10," said Garg.