Reacting to finance minister Nirmala Sitharaman’s proposal that states should borrow to make for the losses on account of non-payment of GST compensation, Punjab finance minister Manpreet Singh Badal sought activation of the disputes resolution mechanism in the Council as provided for in Article 279 of the Constitution.
“I appeal to the Centre that if some states are not agreeable to their proposals, they should not force the solutions on states. The Centre should activate the dispute resolution mechanism in the GST Council, so that states have legal recourse to what they do not agree upon,” he said at a virtual press conference.
Badal also said that the finance ministers of Congress-ruled states are not happy with the outcome of GST Council meeting.
Chief minister of Puducherry V Narayanaswamy, who was also present at the meeting, said it is unfortunate the Centre was not helping the revenue-starved states by honouring its commitment to pay them GST compensation at 14 per cent.
Narayanasamy also said there is a serious flaw in the GST Act as producing states are losing and consuming states are at an advantage under the present GST regime and urged the central government to look into it.
Telangana finance minister Harish Rao pointed out that states have lost 60-70 per cent of their tax revenues after joining the GST regime while the Centre’s loss was pegged at 31 per cent only. The policies pursued by the Centre are benefitting states prone to natural disasters and poor fiscal management. They became disadvantageous to progressive states such as Telangana, the minister said.
Urging the Centre to compensate for GST revenue loss due to Covid-19 induced lockdown and floods in the state, Karnataka home minister Basavaraj Bommai said the state’s tax revenue was estimated at Rs 1.8 lakh crore. But, it will be difficult to achieve economic growth of the state.
Underlining that there is a constitutional provision under the GST regulations to pay the state for the shortage in revenue, Bommai insisted that the dues be paid immediately. The cess collected to compensate for the revenue losses to the state goes directly to the Centre.
Meanwhile, deputy chief minister of Delhi Manish Sisoda charged the Centre with failing to fulfil its promise to the states at the launch of the GST regime four years ago. He said that the city government cannot take loan from the Reserve Bank of India (RBI) to meet their reveune shortfall. The Delhi government is expected to have a revenue shortfall of around Rs 21,000 crore in the current financial year.
“The Centre had promised that it will pay GST compensation to states at the rate of 14 percent for five years in case of revenue shortfall. But, today at the GST Council meeting, the Centre refused it, saying there was no provision for compensation in situations like a pandemic,” Sisodia said.
(With PTI inputs)