The chorus of protest against the Narendra Modi government’s inability to refund states their share of the Goods and Services Tax (GST) touched a new high on Wednesday with West Bengal Chief Minister Mamata Banerjee writing to Prime Minister Modi. In her letter, the Bengal CM said she was deeply anguished by the GST imbroglio which amounts to a betrayal of trust and moral responsibility of the Centre to the states.
She said the option put forward by the government, viz. borrowing from the markets, would effectively hurt the finances of the states. Banerjee said the inability to pay the states their share of GST violates the very premise of federalism.
Apart from Banerjee, five other chief ministers of states ruled by non-BJP parties have reminded the Centre of its constitutional responsibilities in the wake of the Rs 2.35 lakh crore owed to states. Kerala Chief Minister Pinarayi Vijayan, Tamil Nadu CM Edappadi K. Palaniswami, Delhi CM Arvind Kejriwal, Telangana CM K. Chandrasekhar Rao and Chhattisgarh CM Bhupesh Baghel had raised similar concerns. They had said it was Centre’s duty laid by law to reimburse states for loss of revenue in the first five years of the GST regime.
If states were to borrow, the CMs said the repayment schedules would then place an increased burden on their finances. The Centre, they said, could take up this burden and pay back the loan by carrying forward GST cess collection past 2022.
In her letter, Banerjee reminded PM Modi of the time when deceased BJP leader Arun Jaitley had rejected GST implementation claiming the UPA 2 government would not be able to honour the compensation of GST losses to states. She added that the Central government was fast losing the states’ trust.
Delhi Chief Minister Kejriwal had requested the PM to adopt legally viable options to provide GST compensation to the states. He said states are already reeling under financial crisis due to shortfall in revenue collections and increased commitment of expenditure emerging from Covid-19 response.
Kejriwal said the assurance of GST compensation was one of the pillars on which the entire GST structure rested.
Tamil Nadu CM Palaniswami said the Centre has a moral and legal obligation to compensate for the shortfall in GST collections. So far, no compensation has been released for the shortfalls in revenue collection since April 1, he said.