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GST Council To Take Call On Funding Compensation Shortfall: Nirmala Sitharaman

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The finance minister mentioned the Centre has given states their due share in devolution even throughout COVID-19

New Delhi:

Finance Minister Nirmala Sitharaman on Friday mentioned the GST Council will arrive at a typical floor on methods to compensate states for the lack of income. Replying to a debate on supplementary calls for for grants within the Lok Sabha, Ms Sitharaman mentioned she is going to honour the commitments made by her predecessor Arun Jaitley with regard to the payout of Goods and Services Tax (GST) compensation.

“Even if we are in an ‘act of God’ situation, but we will discuss in the Council how to give compensation to the states… The Council will take a call on how to borrow to meet the (revenue) gap,” she mentioned.
The minister, nevertheless, dominated out funding the income shortfall from the Consolidated Fund of India, saying the quantity needs to be paid from the compensation cess kitty.

The states are looking at a income shortfall of Rs 2.35 lakh crore GST this fiscal 12 months. Of this, as per the Centre’s calculation, Rs 97,000 crore is estimated to be on account of GST implementation, whereas the remaining Rs 1.38 lakh crore is as a result of COVID-19 pandemic.

The Centre late final month gave two choices to states to borrow both Rs 97,000 crore from a particular window facilitated by the RBI, or Rs 2.35 lakh crore from the market, and proposed extending the compensation cess levied on luxurious, demerit and sin items past 2022 to repay the borrowing.

On the Opposition’s cost that the federal government is reneging on its dedication of compensation cost by terming COVID-19 an act of God, Ms Sitharaman mentioned, “It is an irresponsible comment towards a responsible government, led by Prime Minister Narendra Modi.”

Chief Ministers of six non-BJP dominated states — West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu — have written to the Centre opposing the choices which require states to borrow to fulfill the GST shortfall.

Ms Sitharaman additional mentioned, “We are ready to discuss. We are taking everyone together and Council will find a view. This is my optimistic expectation. The Centre is not reneging (from its commitment).”

Taking on the opposition for ridiculing her comment that COVID-19 is an ”act of God”, she mentioned it might have been acceptable if she had mentioned ”drive majeure”.

She mentioned the Centre has given states their due share in devolution even on the time of COVID-19 when the Centre’s funds are harassed.

Without naming the UK, the minister mentioned a nation which has given a 15 per cent fiscal stimulus is now planning to boost taxes.

“We are not contemplating on increasing taxes to make up for what we gave (as stimulus),” Ms Sitharaman mentioned.



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