Mamata Banerjee writes to PM Modi; expresses 'anguish over GST imbroglio'

West Bengal Chief Minister Mamata Banerjee on Wednesday alleged that depriving states of GST compensation is an "attempt to undermine federalism". Maintaining that it was imperative to strengn cooperative federalism in this crisis situation, Mamata urged Prime Minister Narendra Modi t to belie trust between states and Centre on issue.

In her letter to PM Modi, Banerjee asked him "t to allow an insufferable blow to federalist polity of nation by depriving states of GST compensation". She furr added that "agreed formula" for giving up taxing powers was promise of full compensation of shortfall in GST collection for five years. 

"I am deeply anguished by Goods and Services Tax (GST) imbroglio which tantamounts to a betrayal of trust and moral responsibility of Government of India towards states, violating very premise of federalism. This is a travesty and an abrogation of fundamental basis on which states gave up 70 per cent of ir taxing powers, including entire VAT regime, to usher in GST regime," Banerjee said in four-p letter.

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Centre's two options to States

Centre has calculated compensation requirement by states in current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from cess levied in GST regime. Revenue Secretary Ajay Bhushan Pandey said of this, Rs 97,000 crore is on account of GST shortfall, while rest is due to impact of COVID-19 on ecomy. Centre has reportedly refused to pay mandatory GST compensation of 14% for current year due to COVID-19 pandemic.

To alleviate state's GST stress, Revenue Secretary Ajay Bhushan Pandey said a special window can be provided to states at a reasonable interest rate for borrowing of Rs 97,000 crore - amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.

second option before states is to borrow entire Rs 2.35 lakh crore shortfall under special window. "States have been given seven days' time to think over proposal," Pandey said.

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(With inputs from ANI)