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GST set to meet, Sushil Modi says Centre morally bound to pay states

The Bihar Deputy CM heads the ministerial panels on Integrated GST (IGST) settlement, IT challenges in implementation of GST, and analysis of revenue from GST.

Written by Santosh Singh | Patna | Updated: August 26, 2020 11:11:03 am
No party can form government in Bihar alone, alliance a reality: Sushil ModiBihar Deputy Chief Minister Sushil Kumar Modi. (File photo)

Bihar Deputy Chief Minister and Finance Minister Sushil Kumar Modi said on Tuesday that the Centre should borrow and pay GST compensation to states even if it is not legally bound to do so.

“But the Centre is morally bound to do so”, Modi said ahead of the GST Council meeting on August 27.

“State finances are under stress. We are able to pay only salaries, wages and pensions. We are heavily dependent on the Centre as 76 per cent of our revenue comes from the Centre…,” Modi said at an online Idea Exchange of The Indian Express.

“States should get GST compensation. We will raise the matter during the upcoming meeting. States cannot borrow. It is the Centre that should borrow. It is the moral responsibility of the Centre to help the states. If states cannot get support from the Centre in these times of difficulty, it would be difficult for the states,” Modi said.

Explained | GST proceeds: what’s due to states, and what Centre proposes

The Bihar Deputy CM heads the ministerial panels on Integrated GST (IGST) settlement, IT challenges in implementation of GST, and analysis of revenue from GST. The panels on IGST and IT met recently.

Thursday’s meeting of the GST Council has the single-point agenda of compensation to states for losses of revenue under the indirect tax regime. Compensation payments to states are pending for the four months of this financial year — April, May, June, and July.

The option of exploring market borrowing to bridge the compensation deficit was discussed in earlier meetings as well, and it was decided to seek legal opinion from the Attorney General of India. However, the A-G is learnt to have put the ball squarely in the Centre’s court, stating that the central government does not have an obligation to pay for the revenue shortfall, and that the Council can recommend to the Centre to allow states “to borrow on the strength of the future receipts from the compensation fund”. The A-G’s opinion left it to the Centre to take the “final decision in the matter”.

Several states have voiced concern over the borrowing proposal, saying the compensation fund is unlikely to have enough funds to cover for the borrowing by states. Some of them have instead suggested raising tax rates, and bringing more items into the ambit of compensation cess to shore up revenues.

Modi described the BJP’s alliance with Nitish Kumar as “pragmatic politics”. Asked whether the Bihar BJP was not backing Nitish fully, and whether there could be an attempt to change the chief minister after the elections should the NDA win again, he said: “There are elected CMs and selected CMs. Elected CMs contribute to his party or alliance’s victory. Nitish Kumar is an elected CM, and not just the leader of the JD(U). There has been no confusion in the BJP about this. Where does the question of changing him after the elections arise? We have fought elections earlier, and he has remained CM.”

To a question on whether the BJP would contest the elections as an equal partner of the JD(U) as it had done in the Lok Sabha polls, Modi said: “These things are decided by the central leadership.” He said that the BJP, JD(U), and LJP would contest together, and would win comprehensively.

On migration and unemployment due to the coronavirus pandemic and the nationwide lockdown, the senior leader said unemployment was not “Bihar-specific”, and had impacted other states as well.

“We have opened an engineering college in each of the 38 districts. We have opened ITIs at the subdivision level. We have nursing colleges now. If one goes to a hospital in Bihar, one no longer sees only nurses from Kerala; most nurses are now from Bihar. We are focussing on skill development.”

Migration would continue if more money was to be earned than in the home state, Modi said. But he conceded that Bihar sees more migration because the state does not have many major industries.

Asked whether Bihar could have dealt with the problems of migrants who were stranded outside the state better, Modi said: “Is it humanly possible to bring migrants in buses from as far away as Kerala, Gujarat and Jaipur? Plus, it could have amounted to a violation of lockdown norms. We brought them later by trains, and have given them rations until November.”

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