GST Council: Kerala FM insists on activating mechanism to settle row

Our Bureau New Delhi | Updated on October 06, 2020

Kerala Finance Minister Thomas Isaac   -  The Hindu

The Centre should immediately pay State governments at least a part of the GST compensation in the light of the shortfall in revenue and financial crunch, insisted Kerala’s Finance Minister Thomas Isaac at the GST Council meeting on Monday.


While rejecting the two-option compensation package by the Centre, he said there can be no bifurcation of revenue shortfall as being due to pandemic and due to GST implementation. “Entire shortfall needs to be compensated. It is the constitutional right of the States. Compensation cannot be linked to normal borrowing or additional borrowing limits allowed to States,” he asserted.

Dispute resolution

At the earlier meeting State governments had been given a week to choose an option or lose compensation entirely. “In the circumstances if the avowed principle of consensus is not being upheld, the legal provisions for Dispute Resolution Mechanism within council should be activated without delay,” he said.

“Both the options infringe upon the above two cardinal principles and therefore not acceptable. And we would out right reject all notions that those who refuse to make the choice will lose their compensation till 2022. It is true that central government presented the two options before the Council, like we the States also presented our options. The issue continues to be open for a decision of the council,” he said. Assurance of a five-year compensation package and the comfort it provides to the States was the “deal breaker” in implementing GST, he reminded the Centre.

“What we States are demanding is not for support for any additional expenditure but to maintain our budgeted expenditure. It is against all principles of macro-economy to enforce a cut in the expenditure of the States that account for 60 per cent of the total expenditure of the Union government,” he said. “As is well known India has one of the weakest stimulus packages and the worst economic contraction in the first quarter of FY21. The attitude of the Centre has pushed the economy to the brink of the disaster,” he said.

Isaac said it was after much deliberation that 14 per cent growth was guaranteed to the States. But the optimism on the buoyancy in GST has not been borne out even after three years.

Published on October 05, 2020

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