New Delhi: Just a day before the crucial GST Council meeting on Thursday, Congress President Sonia Gandhi charged up the non-BJP states to corner the Modi government over unpaid GST compensation dues for April-May that remained unpaid for two months.
The compensation for June-July has also become due this month.
Sonia Gandhi’s virtual meeting on Wednesday with seven chief ministers of opposition ruled states, including West Bengal chief minister Mamata Banerjee, has set the tone for a stormy GST Council meeting which has been called to sort out the issue of GST compensation dues as the Centre is in no position to pay them through the collection of GST cess.
Sonia’s aggressive stand may derail finance minister Nirmala Sitharaman’s bid to garner the support of States to tweak the GST cess rates to meet the Centre’s obligation under the law.
“The refusal to compensate the States is nothing short of betrayal by the Modi Government and a betrayal of trust of the people of India,” Sonia Gandhi said in her address to non-BJP chief ministers.
The Congress leader said that a common nationwide goods and services tax (GST) came into existence as an example of cooperative federalism as the States agreed to forego their constitutional powers in the larger national interest and on the solemn promise of compulsory GST compensation for a period of 5 years.
Under the GST (Compensation to States) Act, 2017, the Centre is duty-bound to compensate States for any loss in their revenue collection for five years. The compensation amount is calculated assuming 14% compound annual growth in a state’s revenue collection by taking the FY 2015-16 as a base year.
Under the law, the Centre is required to pay GST compensation dues to states on a bi-monthly basis.
For example, the GST compensation for the April-May period becomes due on June 10. Similarly, the Compensation for June-July has also become due on August 10.
The annual GST compensation amount for each state is calculated by the Comptroller and Auditor General of India (CAG) after the expiry of the financial year.
"GST compensation being paid to states on time according to the laws passed by Parliament is crucial and I know this is not happening," said the Congress leader.
“Dues have accumulated. The finances of all states have been affected badly,” Sonia Gandhi added.
Widening gap
Last month, the Centre informed that it had paid over Rs 1.65 lakh crore in GST compensation dues to States for FY 2019-20 against the collection of GST Cess of Rs 95,444 crore, a massive gap of over 69,850 crores.
However, the Centre was able to manage the situation as in the previous two years, FY 2017-18 and 2018-19, the GST cess collection was in surplus but that was not enough to meet the shortfall between cess collection and GST dues for FY 2019-20.
In order to pay the states, the Centre also transferred Rs 33,412 crores from the Consolidated Fund of India as a part of an exercise to apportion balance of IGST pertaining to 2017-18.
According to people familiar with the matter, the gap between the GST cess collection and GST compensation is all set to become wider in the remaining two years following the outbreak of Covid-19 global pandemic.
Also Read: Refusal of GST compensation to States betrayal on part of Centre: Sonia Gandhi
