Delay in GST compensation to States, issue in Rajya Sabha
In Rajya Sabha on Wednesday, the Congress raised the issue of the Center delaying the payment of compensation to states for revenue shortfall in the Goods and Services Tax (GST) since August, saying that this could lead to a halt to development work and payments to employees. Raising the issue through a Zero Hour mention, Pratap Singh Bajwa (Cong) said states had left the right to levy taxes in the interest of GST’s’ one-nation-one-tax’ regime.
In July 2017, when the GST subsumed 17 different central and state levies, states were assured that they would be compensated for any revenue loss vis-a-vis a pre-GST position for the first five years of GST implementation.
Bajwa said the compensation was to be paid on a monthly basis previously and afterwards once in two months.
Punjab, he said, is to receive Rs 2,100 crore in GST compensation and its overall dues are Rs 4,100 crore together with Rs 2,000 crore arrears.
Payment delays are “greatly unfair for small states because it can “delay progress on development and payment of pensions,” he said.
Last week, five non-BJP ruled states raised concerns about the Center’s delay in paying GST compensation, resulting in pressure on their finances, as GST includes significant amounts of government revenue.
In a joint statement released after last Wednesday’s meeting of the Empowered Committee of State Finance Ministers in Delhi, Finance Ministers from West Bengal, Kerala, Delhi, Rajasthan, and Punjab confirmed that the GST payment is still outstanding.
GST accounts for almost 60 percent of state tax revenues. Many states already face up to 50% of total GST deficits.
As a result, states face intense pressure on taxpayers, many of whom are already using ways and means or even overdrafts, the finance ministers said.
Bajwa said there was no explanation for the delay in compensation payment.
He asked Finance Minister Nirmala Sitharaman to investigate the matter and immediately release the payment.
Manas Ranjan Bhunia (TMC) said that GST collections fell short of the target of Rs 1 lakh crore, through a separate Zero Hour mention.
While everyone was in favor of GST being implemented, it was cautioned that premature implementation would create “turbulent economic situation,” he said.
The Center’s compensation to states for GST collections revenue shortfall has been delayed as the amount in the compensation cess fund has dried up due to poor collections.
In the first five years of GST rollout, the Constitution Amendment Bill guarantees compensation to states.
In 2019-20 (Apr-Mar), the central government estimated its GST revenue at Rs 6.63 lakh crore, up 13.6 percent from the 2018-19 Rs 5.84 lakh crore.
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