Tamil Nadu CM writes to PM Modi over GST compensation of states; cites difficulty

Opposing Centre's two-options to meet GST compensation required by States,  Tamil Nadu Chief Minister Edappadi K Palaniswami has written to Prime Minister Narendra Modi over GST, stating that he is "very concerned about two options offered to States after 41st GST Council Meeting".  Centre on Thursday placed before GST Council two options for borrowing by states to meet shortfall in GST revenues, pegged at Rs 2.35 lakh crore in current fiscal.

Reasoning out his concern, Tamil Nadu CM stated that y had also indicated that it was for GoI to find necessary funds to compensate states, including from Consolidated Fund of India if re was a shortfall in cess collections.

"Our stance has been that Government of India (GoI) has moral and legal obligation to pay compensation for shortfall in GST collections. We had also indicated that it was for GoI to find necessary funds to compensate states, including from Consolidated Fund of India if re was a shortfall in cess collections. As a via media in 41st GST Council meeting held on August 27, 2020, our representa8ive Thiru D Jayakumar has suggested that GoI could mobilise resources and lend funds required to GST Compensation Fund and that loan could be serviced through an extension of GST Cess for a few years beyond 2021-22. This was a very reasonable and practical," letter read.

Furr stating difficulty and expense in implementation, Chief Minister stated that both options suggested by GoI, states are being required to borrow from market to make good shortfall in compensation due.

READ: Centre places before states 2 options for borrowing to meet GST revenue shortfall

Earlier in day, Chhattisgarh CM Bhupesh Baghel wrote to Union Finance Minister urging that Union Government should arrange amount required. Baghel reasoned that if State Government obtains amount through a loan, n entire burden will fall on m.

READ: Sonia Gandhi lashes out, claims 'Powers trying to shut youth's voices' amid NEET & GST row

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.

(With inputs from ANI)

READ: Chhattisgarh CM writes to FM Sitharaman opposing Centre's options for GST Compensation

READ: Asking states to borrow is 'skewed idea': Deve Gowda on GST shortfall