Centre must devise mechanism for GST compensation, says WB finance minister

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Published: November 22, 2019 12:12 AM

The compensation dues for all states together till October could be around Rs 40,000 cr.

Amit Mitra, West Bengal finance ministerAmit Mitra, West Bengal finance minister

West Bengal finance minister Amit Mitra on Thursday said that it was for the Central government to devise a mechanism for payment of compensation to states under Goods and Services Tax (GST), if the fund set up for the purpose runs dry, as the relevant law is silent on an alternative mechanism.

Mitra said that five states (Delhi, Rajasthan, West Bengal, Kerala and Punjab) alone had dues worth nearly Rs 10,000 crore for the August-September period. “The compensation dues for all states together till October could well be around Rs 40,000 crore,” he added. On Wednesday, these states had claimed that the Centre had delayed compensation payment to them, which should have been paid by October-end.

According to government data, the amount collected under compensation cess fund for the April-October period is at Rs 56,000 crore. The government has so far disbursed about Rs 45,000 crore for the first four months (April-July) of the fiscal.

“If there is no money in the fund, call a GST Council meeting and tell the states the way forward,” Mitra said. Responding to a query on whether the payment deferment was restricted to non-BJP ruled states, Mitra said that he had spoken to finance minister of three BJP-ruled states and they confirmed that no payment had been made to them either.

Under the GST regime, the central government has provided states with a constitutional guarantee that their GST revenue growth of 14% year-on-year would be protected for a period of five year. This would be achieved by bridging the revenue shortfall from the fund which consists of collection from cess levied on luxury and sin items.

This guarantee ‘was a necessary enabler in states agreeing to subsume their fiscal sovereignty into GST,’ the state finance ministers had said.

Mitra also called demonetisation and an ill-timed GST implementation as structural hits to the economy, which could see a yearly GDP growth fall below 5% for the current fiscal.

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