Four Chief Ministers wrote to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman asking for the Goods and Services Tax (GST) compensation.
In his letter to the PM, Delhi CM Arvind Kejriwal on Tuesday said the two options given to the states by the finance minister, requiring states to borrow loans and meet the repayment liabilities, will just put 'onerous burden' on the states. He urged the ministry to consider other legally viable and sustainable options for providing GST dues.
Telangana Chief Minister K Chandrashekar Rao wrote to the PM stating the states are already in a tight spot due to the global pandemic, the added pressure of increased expenditure that has come along with it. He said the states have a revenue shortfall due to 'no major buoyant taxes of their own' after the implementation of GST. Whereas, the Centre is still left with buoyant sources like income tax, corporation tax and customs duties.
Earlier, on Monday, Tamil Nadu Chief Minister Edappadi K Palaniswami had also written to PM Modi over GST compensation to states, stating that it is the 'moral and legal obligation' of the Centre to pay compensation for the shortfall in GST collection, reported The Quint.
Chhattisgarh Chief Minister Bhupesh Baghel has written to Finance Minister Nirmala Sitharaman, requesting the centre to arrange funds 'on its own' and not pressurize states to borrow the compensation amount.
"If the central government is unable to provide the GST compensation, then the pressure should not be on the states to take loans in view of it. The central government should arrange the money," Baghel said.
Punjab Finance Minister Manpreet Singh Badal's letter to the Finance Minister stated that the two options given breach the constitutional assurance by the Centre. Badal has urged the FM to call for an urgent GST council meeting.
"We believe this as a betrayal of the spirit of cooperative federalism that formed the backbone of the GST journey so far."
Kerala Finance Minister Thomas Isaac told The Indian Express that the states are not just rejecting the Centre's proposal, but rather laying down the third option – the central government borrows the full compensation and the states agree to extend the tax for a sufficiently long period to recoup this amount.
"Central borrowing is very simple, they can directly borrow from the market, but if they are afraid that interest rates will rise and so on, monetize the debt. Simple. That's what all the countries are doing," Isaac as quoted.
Earlier on August 27, Finance Minister Nirmala Sitharaman informed that the coronavirus pandemic has impacted goods and services (GST) collection and the shortfall is ₹2.35 lakh crore for fiscal 2021. GST collections including compensation tax to the states had been falling short of targets much before the COVID-19 pandemic.
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