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States Express Concern over Delay in GST Compensation, Ask Fin Min to Expedite Payments

It was recalled that the assurance of GST compensation was a necessary enabler in states agreeing to subsume their fiscal sovereignty into GST.


Updated:November 20, 2019, 7:04 PM IST
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States Express Concern over Delay in GST Compensation, Ask Fin Min to Expedite Payments
In this file photo, a man walks past a banner during a protest by traders against the implementation of the Goods and Services Tax (GST) in Delhi . (REUTERS/Adnan Abidi)

New Delhi: Opposition-ruled states on Wednesday expressed concern over delay in release of GST compensation which has put them in an acute financial position.

In a joint statement here, the finance ministers of Delhi, West Bengal, Punjab, Rajasthan and Kerala said they are facing two months' delay in payment of GST compensation by the Centre.

Speaking to reporters, West Bengal Finance Minister Amit Mitra said, "We thought we will make appeal to Union Finance Minister (Nirmala Sitharaman) saying that she must personally look into this and not violate the constitutional provisions as passed by parliament of India."

All the states are in distress if this compensation which is due to them is not given, he said.

"It is a dangerous situation, there is no precedence before," he said, adding this is the first time in history that there has been a delay.

"States have not received GST compensation for August and September which is against constitutional amendment where it was stated clearly that states when they fall below below 14 per cent rate of growth of their GST (revenue), they will get compensation by the Centre. So far we have been receiving compensation," he said.

As far as West Bengal is concerned, the pending amount stands at Rs 1,500 crore, he said. Kerala Finance Minister Thomas Isaac said the state was supposed to get Rs 1,600 crore.

"Kerala (is) under overdraft for almost one week now. This is Centre engineered crisis in the state finance. It has never happened in the history of India. Something drastic has to be done," Issac said.

Punjab is also under threat of overdraft if the dues are not released immediately, state Finance Minister Manpreet Singh Badal said. Punjab is awaiting Rs 2,100 crore as compensation while arrears stand at Rs 2,000 crore, Badal said.

Echoing similar concerns, Delhi Deputy Chief Minister Manish Sisodia said due to delay in payment, finances of states are under pressure. The GST compensation due to Delhi is Rs 2,355 crore.

In their joint statement, the ministers said no explanation whatsoever has been furnished for this delay and as a result, states are facing acute pressure on fiscals and some are already resorting to overdrafts.

"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 a host of areas literally bringing activities of the States to a grinding halt," it said.

It was recalled 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 added.

"It was only after the required provisions for compensation were incorporated in the Constitution that States agreed to join the GST. The current delay has shaken the confidence of the States who have so far supported GST in a spirit of rare bonhomie. Despite many challenges from time-to-time States have extended their support to all major decisions of the GST Council," the statement said.

They also suggested that the matter should be placed on the agenda of the next meeting of the GST Council and a healthy mechanism be evolved to provide compensation in future with due urgency and judiciousness.

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