Tamil Nadu CM writes to Modi on need to tweak FinMin’s GST proposal

Our Bureau Chennai | Updated on August 31, 2020

Says there are concerns over both the options put forth by the Centre

As the GST compensation debate intensifies, Tamil Nadu Chief Minister Edappadi K Palaniswami has written to Prime Minister Narendra Modi, seeking his intervention in revisiting Finance Ministry’s stance in order to help States have adequate funds.

He requested the Prime Minister to direct the Finance Ministry to agree to a mechanism in which the Centre raises the required funds as a loan and lends it to the GST Compensation Fund against future cess receipts, so that the GST compensation can be paid in full to the States in 2020-21.

The Tamil Nadu Chief Minister also requested the Prime Minister to ensure that the States get their full dues of the compensation in the current year itself, and reduce neither the compensation payable nor the already announced and committed additional borrowing permissible to States of 2 per cent of GSDP under the Atmanirbhar Bharat stimulus package in any circumstances.

The Finance Minister could also provide a formal and categorical assurance that any spillover of the compensation due will be paid in the period after March 31, 2022.

Relaxation of conditions

Also, Palaniswami sought relaxation of the conditions attached to the permission to be accorded by the Government of India to States to borrow under the Atmanirbhar Bharat scheme.

“These measures will ensure that not only are States treated justly and fairly in the matter of being provided the due compensation for the revenue shortfall post implementation of GST, but will also have adequate funds in 2020-21 to meet their essential expenditure commitments, and can thus effectively contribute to the revival of the economy,” he said in his letter to the Prime Minister.

Palaniswami highlighted Tamil Nadu’s concerns pertaining to the two options offered to States after the GST Council Meeting held on August 27.

He explained that the net impact of the Centre’s proposed two options is to reduce the overall resources available to States in 2020-21 quite substantially to the extent of about 1 per cent of GDP, amounting to nearly ₹2-lakh crore.

“This will really hurt spending by States on many crucial Covid- and non-Covid-related expenditure. Welfare programmes and infrastructure creating capital expenditure will suffer greatly. This will impede early resumption of growth momentum in the economy and hurt economic revival,” pointed out Palaniswami.

Published on August 31, 2020

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