Ashok Gehlot seeks PM Modi's intervention over GST compensation to states

Chief Minister Ashok Gehlot on Monday urged the Centre to fulfil the promises made to the state governments while implementing GST and leave it to them to have the right to some taxes levied by the Centre.

He demanded Prime Minister Narendra Modi to intervene in the matter "to maintain confidence in the financial relations between the Centre and states".

In a letter to the prime minister, Gehlot has drawn attention to the difficulties faced by states in the payment of GST compensation, an official statement said.

Gehlot has written that under the Constitution amendment, many state taxes were included in the GST and it was said that the states would be provided with compensation in view of the revenue loss.

He said the GST (Compensation to State) Act 2017, guarantees that states be given compensation for five years to meet the revenue loss resulting from the implementation of the Goods and Services Tax.

Therefore, it is now the responsibility of the Centre to ensure that states get the full amount of the compensation without any liability.

He said that despite reduced tax collection due to unavoidable conditions, compensation cannot be reduced or increased under the Act. He said that under the GST Act, the central government cannot decide to increase or decrease the compensation.

Citing the meetings held earlier in the GST Council, he said several decisions were taken in these meetings, including 100 per cent compensation of revenue loss for a period of five years (2017-2022), responsibility of paying the amount and taking loan in the event of shortage. He said the GST is based on collective decisions taken between the Centre and the state governments.

Gehlot has also drawn attention to the complex issues related to the payment of compensation to the prime minister through the letter. He said instead of the predetermined 14 per cent increase in the final year of the Central Government's Compensation, the "idea of ​​zero per cent increase is improper and not justified".

He said in the letter that it is the responsibility of the Centre to manage the Indian economy, because "when the tax collection is high, the central government gets its benefits".

Therefore, it is expected that the Centre should take responsibility if the GST collection in the economy decreases, Gehlot wrote.

Image credits: PTI