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GST compensation shortfall: Govt can't pass the buck to states, says Jairam Ramesh

Taking to Twitter, the Rajya Sabha MP and former union minister Jairam Ramesh said that the Centre is abdicating its legal obligations and that states should oppose it tooth and nail

twitter-logoBusinessToday.In | August 28, 2020 | Updated 19:37 IST
GST compensation shortfall: Govt can't pass the buck to states, says Jairam Ramesh
Congress leader Jairam Ramesh came down heavily on the Centre for blaming the COVID-19 pandemic for GST compensation delay

Congress leader Jairam Ramesh, on Friday, slammed the Modi government for passing the buck for the delays in GST compensation payments to states, asking them to borrow to make up for the shortfall.

Taking to Twitter, the Rajya Sabha MP and former union minister criticised the government, saying that it is now shifting the responsibility to states, "telling them that they should borrow to make up shortfalls". He added that this is "abdicating Centre's legal obligations" and that states should oppose it "tooth and nail".

Following the 41st GST council meeting on Thursday, the government placed two options before the states: to provide a special window to the states, in consultation with the RBI, for the borrowing of Rs 97,000 crore at a reasonable interest rate, which can be repaid from cess collection after five years of GST implementation, ending 2022; or to borrow the entire Rs 2.35 lakh crore GST revenue shortfall under the special window.

Also Read: Govt chased 'bogus' rankings, says Jairam Ramesh after World Bank halts 'Doing Business' ratings

Ramesh also came down heavily on the Centre in another tweet, citing a media report which cornered the government for pinning much of the responsibility for GST compensation delays on COVID-19 pandemic, revealing that the payment backlog preceded the coronavirus shock by almost a year.

The report, published in the Indian Express, said the Centre delayed GST compensation payments to states by almost a year - when payments due for August-September 2019 were pushed. The delay trickled down to subsequent payouts that followed.

Also Read: GST Council Meeting Highlights: 'GST collection severely impacted due to COVID,' says FinMin

The report further added that the economic slowdown, which has been underway for around three years now, started to have a detrimental impact on GST revenue collections in August last year.

Thus, the GDP growth rate, consecutively, slowed from 5.2 per cent in April-June 2019 to 4.4 per cent in July-September, and further to 4.1 in October-December, and to 3.1 per cent in the January-March quarter. The slowdown in GDP growth rate reflected in gross GST revenue, which also decelerated in August to Rs 98,203 crore, to further contract by 2.7 per cent (year-on-year contraction) in September 2019 to Rs 91,917 crore, and posting a 5.3 per cent contraction in October to Rs 95,380 crore.

Citing this report, Ramesh asked the Finance Minister Nirmala Sitharaman if the downward trend in quarterly GDP growth numbers was "also an 'Act of God' or Act of Master Actor?"

The government had first acknowledged the problem of delay in GST compensation payment in the 37th GST Council meeting held in Goa in September 2019 when it indicated that the amount of cess available in the compensation fund at the end of February shall be insufficient for compensation payment (for states' loss of revenue) "till the bi-monthly period of December-January".

Also Read: GST collection shortfall stands at Rs 2.35 lakh crore due to COVID-19 impact

The GST Council had, on November 27, 2019, wrote to states that the GST and compensation cess collections in the prior few months had become an issue and that the recompense requirements are "unlikely to be met".

This prompted several states to raise the issue time and again, asking for their share of revenues.

Also Read: Big hole to fill! States need Rs 1.5 lakh crore GST compensation in FY21 so far

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