Economy

With ₹40,000 cr due, States to press for urgent GST Council meeting

Our Bureau New Delhi | Updated on November 21, 2019 Published on November 21, 2019

Amit Mitra, Finance Minister of West Bengal, addressing a press conference in New Delhi on Thursday   -  Kamal Narang

Bengal Finance Minister Amit Mitra says many States are financially stressed

The war of words over GST compensation continued between the Centre and the State governments, with West Bengal Finance Minister Amit Mitra pointing out that the dues owed to the States and three Union Territories with Legislative Assemblies total about ₹40,000 crore.

According to the GST Act, States and UTs with Assemblies are guaranteed compensation if the GST revenue growth is less than 14 per cent. The amount is paid bi-monthly. This year, States and three UTs were paid ₹28,000 crore for the June-July period. They are yet to be paid for August-September, which was due in October.

The Centre has assured the States/UTs that the dues will be paid soon. Sources in the Finance Ministry admitted that there are some concerns on the compensation fund as the GST collection has been below expectation. If the compensation amount of ₹28,000 crore is taken as the base, then the total amount required for the remaining period would be ₹84,000 crore.

However, the cess amount expected to be collected in the remaining period based on the mop-up in April-August is ₹58,200 crore. Taking into account the unutilised cess amount of ₹23,400 crore, the total amount available would be ₹81,600 crore.

“Any further shortfall in the revenue will further increase the gap between the amount available for release of compensation and the amount of compensation required to be released,” a source said.

Mitra told mediapersons here on Thursday that “this is violation of federalism.” He urged all the States to write to the Union Finance Minister demanding an urgent meeting of the GST Council.

States on overdraft

Mitra said the States are stressed as many of them have exhausted the ‘Ways & Means Advances (WMA)’ and are now using the overdraft facility. WMA is a temporary credit facility provided by the RBI with caps.

When that limit is reached, States opt for an overdraft, which is credit for a slightly longer period.

On Wednesday, five opposition ruled States — Delhi, Rajasthan, Kerala and Punjab apart from West Bengal — in a statement expressed concern over the delay in payment of compensation.

Mitra said that different States have different headroom to face the situation and many States are finding it difficult to meet their expenditure.

Although the compensation is guaranteed by law, there is no legal clarity on what happens when the Centre does not pay or is unable to do so.

On Wednesday, Kerala Finance Minister Thomas Issac indicated that his State could take legal recourse.

Published on November 21, 2019
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