Five non-BJP ruled states have raised concerns over delay in the payment of outstanding Goods and Services Tax (GST) compensation by the Centre, resulting into pressure on financials, as GST comprises significant chunk of revenues for state governments.
In a joint statement issued after the meeting of the Empowered Committee of State Finance Minister in Delhi on Wednesday, finance ministers of the states of West Bengal, Kerala, Delhi, Rajasthan and Punjab said that the GST compensation for August and September required to be paid by the Centre sometime in October continues to be outstanding till date. "No explanation whatsoever has been furnished for the delay of nearly a month. As a result, states are facing acute pressure on fiscals with some already resorting to ways and means or even overdrafts," the finance ministers said.
The state FMs have asked Finance Minister Nirmala Sitharaman to look into the matter personally and release the compensation without further delay. They also wanted the matter to be placed on the agenda of the next meeting of the GST Council and a healthy mechanism evolved to provide compensation in future with due urgency and judiciousness.
"GST comprises nearly 60 per cent of the tax revenues of states. Many states are already facing deficits up to 50 per cent of the total GST. Such huge deficits have the potential to disrupt the budget and planning processes in host of areas literally bringing activities of the states to a grinding halt," state FMs warned.
They also pointed out that the assurance of GST compensation was a necessary enabler in states agreeing to subsume their fiscal sovereignty into GST. "This was preceded by long deliberations within the empowered committee where many states had apprehensions about being able to obtain uninterrupted compensation. It was only after the required provisions for compensation were incorporated in the constitution that states agreed to join the GST," they noted.
The state FMs say the current delay has shaken the confidence of the states, which have so far supported the GST in a spirit of rare bonhomie. They contend that the Centre should remember that despite many challenges from time to time, states have been extending their support to all major decisions of the GST Council.