Next GST Council meet set for voting as Oppn sticks to its demands

“The legal opinion from the Attorney General of India stated that states are entitled to receive full compensation in accordance with the provisions of the Act, irrespective of the shortfall. Also, the compensation is to be paid during the transition period, not like I’ll pay when I have it, two or three years later,” Punjab’s FM Manpreet Singh Badal told The Indian Express.

Badal said Centre will need to bring in amendments to the existing GST (Compensation to States) Act if any of the conditions for the compensation payment is to be tweaked. “To say that we cannot give full compensation or will give less or these are the options. They’ll have to amend the GST (Compensation to States) Act and they need to go to Parliament to amend it. This (compensation) was the constitutional guarantee given to the states,” he said. “Whatever they (Centre) are doing, it will not stand up in the court of law,” he said, adding that he will recommend to his state’s Cabinet and the Chief Minister to consider exploring the legal option.

Chhattisgarh Health Minister T S Singh Deo, who represents the state in the GST Council, said the issue is about abiding with the tenets of the Constitution and if the concerns of the opposing states are not taken note of, then it will set a trend of decisions being taken through majority only. “The nature of the Council was such to take decisions through consensus with states having given up their taxation rights for 70-80 per cent of the goods and services. No state should feel that it doesn’t have the right to say. The decisions should not be through majority. It’s not tenable. If you are violating what is mentioned in the Constitution, then can a vote even override what is mentioned in the Constitution … the first process would be to resolve it within the Council and then look at other options,” he said.

In the 42nd GST Council meeting held Monday, 10 non-BJP-ruled states rejected the two borrowing options floated by the Centre, while reiterating that the Centre needed to borrow money, instead of states, to bridge the compensation deficit of Rs 2.35 lakh crore this fiscal — and not make any distinction in revenue shortfall on account of GST implementation and the pandemic. The Council, however, okayed extension of levy of compensation cess on luxury and sin goods beyond June 2022, implying that compensation will continue to be funded through levy of cess beyond the five-year transition period.

The Opposition-ruled states asked for a division on the issue in Monday’s meeting after the Finance Secretary is learnt to have stated that the states which have opted for the borrowing options can begin borrowing via the special window to be facilitated by the RBI, in coordination with the Department of Economic Affairs and Expenditure. States took strong objection to this, given 10 states have not chosen any option, following which FM Nirmala Sitharaman gave states a window of one week and scheduled the next meeting for October 12.