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West Bengal Chief Minister, Mamata Banerjee, has sought Prime Minister Narendra Modi’s intervention to ensure GST dues are paid to the States.
She urged the Centre to borrow money to compensate the States the shortfall in GST revenues. Instead, the Centre is “unilaterally” thrusting options on States that involved “borrowing lakhs and crores”. Such increased borrowings will lead to State finances going off-track at a time when many of them are struggling to pay salaries to their employees or clear pension requirements.
Growing opposition
Banerjee now joins the list of various non-BJP ruled States that have rejected the proposed compensation mechanism (of the Centre) and have put their objections on record. Apart from West Bengal, other States to have objected include Kerala, Telangana, Punjab, Tamil Nadu, Chattisgarh and Delhi.
“Instead of helping the States, is it proper for the Centre to stop assistance and thrust more financial burden (on States)... I sincerely urge you to intervene on this matter ...,” she wrote in the letter to the Prime Minister.
The Centre on its part proposed, States either borrow the ₹97,000 crore – the revenue shortfall arising on account of GST implementation (without considering the impact of Covid-19) and the principal and intereste would be paid from cess collection; or the entire shortfall of ₹2.35-lakh-crore and the principal will be repaid from the cess; and interest will be borne by the States.
Bengal has rejected the proposals. The first option is insufficient to meet a revenue loss, the second leads to increased interest burden.
“Extend cess collection”
Banerjee said, States “will reciprocate through a supporting resolution that Cess collection continues beyond the five year period, till the debt is entirely liquidated, along with interest payment costs”.
The Chief Minister requested the Prime Minister to uphold “cooperative federalism”, and not “belie the trust reposed in the Centre by the states”. Centre not paying GST dues to States would be “a travesty and an abrogation of fundamental basis on which States gave up 70 per cent of their taxing powers” to bring in the new indirect tax regime.
Banerjee recalled Modi during his tenure as the chief Minister of Gujarat, opposed implementation of GST. One concern was “BJP did not trust the then Government to honour compensation of GST losses to the States.”
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