Kerala may go to Supreme Court for GST Compensation
Seven opposition-ruled states and Union territories held a meeting on Wednesday with Finance Minister Nirmala Sitharaman to demand compensation pending under the Goods and Services Tax regime as reported by Business Standard. They begged that funds should be released as soon as possible for four months since August.
Punjab, Delhi, Puducherry, Kerala, Madhya Pradesh, Rajasthan, and Chhattisgarh pointed out this is very much as Rs 50,000 crore lying “unutilised” in the compensation fund as the states waiting for their money. Kerala also warned against taking the matter to the Supreme Court.
The GST Act provides that the Center will provide adequate compensation to sustain its annual revenue growth of 14 percent for five years despite any possible loss due to the introduction of the indirect tax regime. The new GST system, which came into force on 1 July 2017, subsumed most prevalent indirect taxes and states are eligible for compensation until 2021-’22.
The meeting came days after the GST Council expressed concern over the failure of the Centre to meet states ‘ compensation needs in recent months due to lower tax collections. It wrote a letter to states asking advice to deal with the situation. Kerala, West Bengal, Delhi, Rajasthan, and Punjab issued a joint statement on November 20 that expressed concern about the issue.
“States have huge responsibility and compensation is part of the law,” Punjab Finance Minister Manpreet Singh Badal said after the meeting to The Indian Express. “Government of India is under obligation to pay. We don’t like to keep coming to Delhi frequently. We have handed over our financial sovereignty to government, so we are embarrassed that we have to keep asking for our money.”
Kerala Finance Minister Thomas Isaac said he was “deeply disappointed” with the meeting. “…States’ constitutional right of GST compensation is non-negotiable,” he said in a tweet.
“If necessary Kerala government will approach the Supreme Court under Article 131.”
Manish Sisodia, Deputy Chief Minister and Finance Minister of Delhi, claimed the Center was deliberately holding back the money. “At the time of GST rollout, we were told states will benefit and that’s why states surrendered their tax rights with the Centre,” he said. “Centre had guaranteed compensation at a particular growth rate. Now when states are asking for it, we are not being given. It’s not like money is not there. About Rs 50,000 crore is lying as cess collections, but the Centre has held it back. “Brajendra Singh Rathore, Minister of Commercial Tax for Madhya Pradesh, said the GST compensation money is their right.
“If we do not get back the money that we collect, it goes against the basic structure of GST,” he added. Rajasthan minister Subhash Garg agreed with Rathore.
Union Finance Minister Sitharaman assured the compensation to states but did not specify any timeline or amount. “All of us are duty-bound to safeguard the interest of states,” she said.
On December 18, the GST Council is scheduled to meet. According to Mint, the Council’s upcoming meeting will be the first to seriously consider tax rises. In the past, the council has reduced tax rates on different products.