Five state FMS ask Centre to release GST compensation

GOVTS OF RAJASTHAN, KERALA, DELHI, PUNJAB, WEST BENGAL URGED CENTRE TO IMMEDIATELY PAY THEM GST DUES

FOR AUGUST AND SEP

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 c ompensation f or t he t wo 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 NK 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 lakh crore for the full fiscal.