Expressing her “deep anguish” over the ongoing Goods and Services Tax (GST) compensation issue, West Bengal Chief Minister Mamata Banerjee Wednesday shot off a letter to Prime Minister Narendra Modi, saying that the Centre’s proposal that the state governments could borrow to meet the compensation deficit is “a betrayal of the trust”.
“I am deeply anguished by the GST imbroglio which tantamounts to a betrayal of the trust and moral responsibility of the Government of Indian towards the state, violating the very premise of federalism,” CM Banerjee wrote in her letter.
Banerjee also said that despite assurances, states were being “thrust with two unilateral options, both of which require them to borrow lakhs and crores of rupees, when many of them are unable to pay salaries to their employees”.
“Instead of helping the state, is it proper for the Centre to stop assistance to states and thrust more financial burden on the states,” Banerjee asked. She also said that the “only condition for giving up all of these powers was the promise of full compensation of shortfall in GST collection for 5 years, on an agreed formula.”
The West Bengal CM also reminded PM Modi of the time when he was opposed to the GST implementation on various grounds when he was the Gujarat CM.
“Late Shri Arun Jaitley also unambiguously and publicly stated, in December 2013, that the sole reason why BJP was opposing the GST implementation is because BJP did not trust the then Government of India in honouring compensation of GST, losses to the states!” Banerjee wrote.
Following last week’s GST council meeting, Centre had detailed two borrowing options to states for meeting the compensation shortfall of Rs 2.35 lakh crore– a proposal which has been rejected by several non-BJP states. So far, at least eight non-BJP states and Union territories – Punjab, West Bengal, Kerala, Delhi, Chhattisgarh, Telangana, Rajasthan, Puducherry — have rejected the Centre’s proposal at a meeting on Monday.
While Telangana Chief Minister K Chandrashekar Rao, Delhi Chief Minister Arvind Kejriwal and Tamil Nadu Chief Minister Edappadi K Palaniswami and Kerala CM Pinarayi Vijayan have written to PM Modi, Chhattisgarh Chief Minister Bhupesh Baghel has written to Finance Minister Nirmala Sitharaman, stating that the borrowing should be done by the Centre instead.
As per the Centre’s proposal, option 1 has a special window for states, coordinated by the Finance Ministry, to borrow the projected shortfall of Rs 97,000 crore only on account of GST implementation — and not the Covid-19 pandemic — and this amount can be fully repaid from the compensation cess fund, without being counted as states’ debt.
Option 2 takes into account the impact of the pandemic, proposing states to borrow the entire Rs 2.35 lakh crore and bearing the interest burden though principal will be repaid from the cess proceeds. The GST shortfall amount (Rs 97,000 crore) will not be counted as states’ debt, while the rest of the amount of Rs 1.38 lakh crore will be counted in the books of the states.
(Inputs from Atri Mitra)
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