Govt tells panel it has no money to pay states their GST share, raises alarm

  • | Thursday | 30th July, 2020

Three years since the grand launch of the GST regime in 2017, the government has for the first time admitted that it has no money to pay the state governments their share of GST revenues as was prescribed by the GST law. Since August 2019, much before the lockdown, the economic situation has been such that GST collection is almost half of what is due to the states. Solutions include either raising taxes on some items or bringing exempted items under the tax net.

New DelhI: Three years since the grand launch of the GST regime in 2017, the government has for the first time admitted that it has no money to pay the state governments their share of GST revenues as was prescribed by the GST law. Since August 2019, much before the lockdown, the economic situation has been such that GST collection is almost half of what is due to the states. Solutions include either raising taxes on some items or bringing exempted items under the tax net.

Union Finance Secretary Ajay Bhushan Pandey apparently told the Parliamentary panel on finance ministry that “the central government is in no position to pay the share of the states” under the revenue share formula laid down in the GST Act. Now the Opposition members of the Parliamentary panel are up in arms over the statement made by Pandey. Members from Congress and other parties who attended the first meeting of the standing committee on finance led by BJP’s Jayant Sinha said that Pandey made the comments in front of the committee.

OPPOSITION ALARMED AT SHORTFALL

The first meeting of the committee pending for long due to the coronavirus crisis found Opposition members raising problems faced by the states due to non-release of states’ share over the past few months. The members flagged that the GST law mandates that Centre must compensate the states for any shortfall in reaching a 14% revenue growth target, which is calculated on FY16 revenue base from taxes subsumed in GST. They claimed that states which are incurring huge expenses to battle coronavirus and also assist migrants, those who lost jobs, have been facing a severe resource crunch. Angry members of the Opposition challenged the finance secretary’s statement by asking “how the government could renege on the commitment to the States.” A member of the panel told India Today TV, “The central government is in a rush to push the implementation of GST law. The resource crunch is highlighting that the law was hastily drawn and shoddily implemented. The deficiencies are being exposed by the economic crisis triggered by the pandemic and the Centre is as always clueless on how to resolve the situation.”

FINANCE MINISTRY’S STAND

Sources said that the finance secretary, however, has said that the GST Act was built with provisions to rework the formula for paying compensation to the state governments if the revenue collection drops below a certain level. He said that the issue is under discussion in the GST Council. Amidst clamour for compensation and dues among the states, a finance ministry release on Monday said that the central government has released Rs 13,806 crore of GST compensation pertaining to the FY 2019-20. The GST Council, which is the sole decision-making body for the ‘One Tax’ regime, was scheduled to hold a meeting in July to discuss an alternative formula of compensation for cash-strapped states. But the meeting is yet to be called.



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