Jharkhand CM seeks early release of GST compensation, urges Centre to honour commitment

On Friday, Jharkhand CM Hemant Soren urged Prime Minister Narendra Modi to ask the Finance Ministry to release GST compensation dues at the earliest. Mentioning that Jharkhand had suffered a loss of Rs. 2500 crore in the current fiscal, he lamented that the Union Finance Minister had forced two options on states that would require them to borrow crores of rupees. According to him, this was against the spirit of cooperative federalism and symptomatic of the withering trust between the Centre and states.

In his letter, Soren reminded the PM that the GST regime could be implemented only because the states forfeited their constitutional powers of taxation. Highlighting that the state government was finding it difficult to fulfill the salaries of government servants, he questioned the Centre on why it could not borrow and compensate states. He observed that more funds were needed to take care of farmers, the unorganized sector, and unemployed youth amid the grim economic and COVID-19 situation. The Jharkhand CM contended that the Union government should provide more than the stipulated GST compensation to his state. 

Read: Kerala CM Rejects Centre's Options On GST Compensation, Cites Fear Of Financial Stress

Read: Mamata Banerjee Writes To PM Modi; Expresses 'anguish Over GST Imbroglio'

Centre's two options

Earlier, the Finance Ministry had rejected the demand of multiple states and proposed two options on meeting the shortfall in GST compensation. First, it suggested that states could borrow Rs.97,000 crore (the revenue shortfall arising on account of GST implementation and not taking into account COVID-19) with the entire principal and interest repayment of the debt to be met through cess collection in subsequent years. Moreover, the states have been allowed to borrow an additional 0.5% points under the FRBM Act.

However, if the states opt to borrow the entire amount of Rs. 2.35 lakh crore, only the principal amount shall be repaid from the cess. In such a scenario, the states will have to bear the interest burden. Besides Soren, Delhi Arvind Kejriwal, West Bengal CM Mamata Banerjee, Tamil Nadu CM Edappadi Palaniswami, Kerala CM Pinarayi Vijayan, Telangana CM K Chandrasekhar Rao, and Chhattisgarh CM Bhupesh Baghel have written to PM Modi urging a rethink on the GST compensation options.

Read: GST Compensation: Siddaramaiah Targets CM Yediyurappa

Read: GST Revenue At Rs 86,449 Crore In August, Down 12% From Same Month Last Year