Rajasthan Chief Minister Ashok Gehlot on Monday wrote to Prime Minister Narendra Modi, demanding his intervention in the ongoing GST compensation to the states crisis.
Urging the Centre to provide the compensation that was promised while implementing GST, he demanded PM Modi to look over the “hurdles in the payment of Goods and Services (GST) compensation to the states”.
In his letter, Gehlot has drawn attention to the difficulties faces by the states in the payment of GST compensation, an official statement said.
“The management of the Indian economy is the responsibility of the Central Government and as it benefits from the upside, it is also expected to accept full responsibility for the shortfall in GST collections due to the downside of the economic cycle,” Gehlot wrote in the letter according to a statement from his office.
Geholt said that the GST Act 2017, guarantees that states will be given compensation for five years to meet the revenue loss which has resulted after the implementation of Goods and Services tax.
“It is the obligation of the Central Government to ensure that the States receive, without liability, the full amount of compensation, notwithstanding the shortfall in the collection of cess and that the compensation can neither be increased nor decreased without amending this Act,” he wrote.
He also said that despite the reduced tax collection due to the pandemic, the collection can not be decreased or increased under the GST Act. He said that it is not for the central government to decide to increase or decrease the compensation.
“The Council does not have the power to alter the compensation mechanism without getting the Act amended. Therefore, there is no ambiguity that the shortfall in revenues must be met by revenue transfers from the Central Government,” Gehlot wrote.
The states were given two options by the Union Finance Minister Niramala Sitharaman, one of them being borrowing money from the RBI. The CM has now questioned that if the states borrowed from the RBI, will the debt be accounted on state government’s balance sheet? He also inquired if the loans taken would be interest bearing?
“It is inequitable because under the RBI Act, all RBI surpluses are transferred to the Government of India as dividend. While the Central Government reneges on its promise of paying the compensation to the states, it would end up making profit from the interest paid by the states,” he said.
He also mentioned in the letter that it is the responsibility of the Centre to manage the Indian economy, citing “when the tax collection is high, the central government gets its benefits”.
Therefore, he demanded that Centre should be held responsible if the GST collection in the economy decreases.
