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States voice concern over pending FY21 GST dues

Finance Secretary Ajay Bhushan Pandey has said the Centre is not in the position to pay GST Compensation to states as collections have fallen due to the pandemic, sources said.

By: ENS Economic Bureau | New Delhi | July 30, 2020 3:17:38 am
gst, goods and service tax Finance Ministry officials are reported to have briefed the Standing Committee on Finance Tuesday about the Centre’s inability to pay states in the near future. (File)

Amid indications of delayed compensation payments under the Goods and Services Tax (GST) regime by the Centre to states in the near future, states have raised concerns about the pending dues for this fiscal, citing the need for expenditure in their respective states.

Kerala Finance Minister Thomas Isaac said any revisiting of present arrangements for GST compensation will be a betrayal of federal trust. Finance Ministry officials are reported to have briefed the Standing Committee on Finance Tuesday about the Centre’s inability to pay states in the near future.

According to sources, during a Parliamentary Standing Committee meeting on Tuesday, Finance Secretary Ajay Bhushan Pandey said the Centre is not in the position to pay GST Compensation to states as collections have substantially fallen due to COVID-19 outbreak. His comments were in response to Opposition members’ queries regarding the shortfall in the revenue in view of the pandemic, sources said. Though, the meeting of the Standing Committee on Finance, under the chairmanship of BJP member Jayant Sinha, was focused on the issues related to start-ups and innovation-oriented business enterprises, in the end some of the Opposition members started asking questions about revenue position and payment of GST compensation to states.

It is learnt when Congress party member Manish Tiwari asked if the Centre was trying to go back on its commitment to the states, Finance Ministry official said there are provisions in the GST laws that allow the Centre to defer compensation payments to states when GST collections fall short.

“According to news reports the hearing before the Standing Committee on Finance , Centre has taken the stand that GST Compensation can’t be paid and present arrangements be revised by Council. Such a brazen betrayal of federal trust! Convene the Council meeting immediately as promised,” Isaac said.

Revenue shortall and the ensuing delayed compensation payments were raised in the previous GST Council meeting held in June, wherein it was decided that a Council meeting solely focused on compensation issue will be held in July. The meeting is yet to be convened.

Punjab Finance Minister Manpreet Singh Badal on Tuesday said dues are pending to all states since April and timely payment is important to meet the expenditure requirements of the state. “…the compensation has only been received upto March 2020. 4 months of dues are still pending. April, May, June, and now July 2020. 4 months of pending dues is equivalent to 2 months of salary bill of all Punjab employees. Please ask your alliance partners to stop misleading, and release what is due not just to Punjab, but all states,” Badal said.

The Centre had on Monday released Rs 13,806 crore to the states for March 2020, with the full payout for FY20 at Rs 1.65 lakh crore. The compensation payments to states for this financial year beginning April are, however, still pending

As per the GST (Compensation to States) Act, states are to be compensated for any revenue loss less than the annualised compounded growth rate of 14 per cent from the base year 2015-16 till five years transition period since the GST rollout (2017-2022). Compensation payments are getting delayed as revenue shortfall has worsened due to Covid-19 pandemic. GST collections had recorded a 41 per cent decline in the April-June quarter, falling to Rs 1.85 lakh crore from Rs 3.14 lakh crore during the same period a year ago.

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