Stalin lauds non-NDA CM's stance on GST compensation, says 'Non-payment is a travesty'

Appreciating n-NDA CM's stance on GST compensation, DMK working President MK Stalin on Thursday wrote and urged m to vote against two borrowing options proposed by Union government at GST Council Meeting on October 5. This comes after  GST Council in its meeting failed to reach a consensus on ways to compensate states for loss of tax revenue. panel will meet again on October 12 to thrash out state compensation issue, Finance Minister Nirmala Sitharaman said after a marathon eight-hour meeting.

Around 21 states accepted one of two borrowing options suggested by Centre, but 10 did t agree. In his letter, Stalin mentioned CAG Report for fiscal year 2018-2019 and said that report shows that Union Government has "illegitimately transferred funds of Rs 47,272 crores" from "GST compensation account to Consolidated Funds of India" during 2017-18, and 2018-19.

"Your efforts in standing united to uphold federalism are greatly appreciated. When Union has moral and legal obligation to pay States, proposing we should borrow to substitute for ir n-payment is a travesty of both States' rights and Justice," he wrote in letter.

" possibility of such illegitimate transfers for past fiscal years (2019-2020) remains," he ded.

DMK chief furr urged Chief Ministers to hold Union government to its duty and its commitments to CAG, and asked government to reimburse pending amount immediately, and initiate State's compensation payments from this deposit.

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Row over borrowing options

Finance Ministry suggested that states could borrow Rs.97,000 crore ( revenue shortfall arising on account of GST implementation and t taking into account COVID-19) with entire principal and interest repayment of debt to be met through cess collection in subsequent years. Furrmore, states have been allowed to borrow an ditional 0.5% points under FRBM Act. But if states opt to borrow entire amount of Rs. 2.35 lakh crore, only principal amount shall be repaid from cess. In such a scenario, states will have to bear interest burden. 

Several states such as Delhi, Jharkhand, West Bengal, Tamil Nu, Kerala, Telangana, Maharashtra and Chhattisgarh have urged Centre to rethink  GST compensation options. Recently, CAG observed that Modi government retained Rs.47,272 crore of GST Compensation Cess collected in Consolidated Fund of India during 2017-18 and 2018-19. This came in for a lot of criticism from opposition parties. 

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