While implementing GST, the Center had assured the states that by July 2022, the Center will make up for the decline in tax collection by implementing GST.
After Maharashtra, Tamil Nadu and Delhi, Punjab has also agreed to the approval of the first option under the formula suggested by the central government regarding GST. In order to compensate for the fall in the Goods and Services Tax (GST) in the current financial year 2020-21, the central government had suggested options to the states, which is constantly being negotiated between the Center and the States and Union Territories. It is believed that the states which have not yet chosen any option can choose the first option in the coming days. The central government has made a provision of 2.16 lakh crore under this option.
West Bengal has yet to clarify its stand
The central government had suggested two options to the states regarding the decline in GST collection, out of which states and union territories have been asked to choose one. Most states have agreed to the first option. However, till now West Bengal has kept silence on this issue. Regarding the issue of GST compensation, the session of the 42nd GST Council was extended last Monday, even after that, Bengal has not yet clarified its stand.
Punjab had earlier said the decision against the constitution
Punjab had earlier refused to choose either of the two options. Punjab Finance Minister Manpreet Singh Badal categorically described both options as a case of a constitutional violation. Till that time, according to the option suggested by the central government, the debt was to be raised for GST compensation. However, now the central government has given relief to the states in this matter.
While implementing GST, the Center had assured the states that by July 2022, the Center will compensate states for the decline in tax collection by implementing GST and it will be assessed on the basis of 14% revenue increase every year. The objection of the states is that now under the option the central government is suggesting, the interest on special window loans will be repaid by GST compensation cess, but the state will have to bear the burden of debt raised from the market. .
Finance Minister Nirmala Sitharaman wrote a letter to the states
In a letter to the states and union territories last week, Union Finance Minister Nirmala Sitharaman said that she has got a total of Rs 2.16 lakh crore under the first option (special window and additional debt equal to 0.5% of the GDP of the states/union territories). The condition will be provided.
Under this option, the central government has kept the upper limit of loans taken by all the states for implementing GST, 1.1 lakh crores. Due to this, GST collections declined due to Corona epidemic and now it has become 2.35 lakh crores. The Finance Minister has written in his letter that in the fall of 2.35 lakh crores, 1.83 lakh crores will be paid in this financial year and the rest next year. In this way, the central government says that the compensation of 2.16 lakh crores is more than the requirement of the states in this financial year.
What is Kerala’s objection?
Kerala wants the Center to bear the entire burden of GST compensation of 1.83 lakh crores. 1.1 lakh crore of it is due to the implementation of GST and 73 thousand crore due to the fall due to Corona epidemic. The finance minister of Kerala says that taking more loans will not have much impact on the financial health of the center but may limit their debt capacity in the future for the states.
These states have chosen the first option
Among the options suggested by the central government, most states and union territories have chosen the first option. This includes Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh, Uttarakhand, Tamil Nadu, Delhi and Jammu and Kashmir.
These states have not yet chosen any option
Most states and union territories of the country have accepted the proposal of the Central Government. However, so far some states have not yet officially clarified their stand with the GST Council. This includes Jharkhand, Kerala, Punjab, Rajasthan, Telangana, West Bengal and Chhattisgarh. Of this, Punjab has agreed to choose the first option today.