GST cess: State Fin Mins meet FM, get little assurance

Finance ministers of Delhi, Punjab, Puducherry and Madhya Pradesh and officials from Kerala, Rajasthan, Chhattisgarh and West Bengal Thursday met Union Finance Minister Nirmala Sitharaman seeking an early repayment of GST compensation cess but got no assurance from her on the timeline of the release of payment.

The Centre has not paid the GST compensation cess to states for August and September and is staring at a default even in October. The total amount could swell up to Rs 60,000 crore.

Wednesday's meeting was an unscheduled one, which came after the Centre wrote to states that it was not in a position to pay the compensation cess further because of its falling GST revenues. The GST Council is expected to meet on December 18 to sort out compensation cess issue and rate revisions.

The October GST collection went a little above Ra 1 lakh crore but in two months prior to that, there was a year-on-year decline in GST collection. The Centre has projected its GST revenue in 2019-20 at Rs 6.63 lakh crore, up 13.6% from the Rs 5.84 lakh crore collected in 2018-19.

“State government has not so far received GST Compensation for October, pushing the treasury into severe ways and means crises. It is unfortunate that the union government is insensitive to the needs of state finance. Remember GST compensation is a statutory right of states,” Kerala Finance Minister Thomas Isaac, who could not make it to Delhi Isaac had recently, had said recently.

When the GST subsumed 17 different central and state levies in July 2017, states were assured that they will be compensated for any loss of revenue for the first five years of the introduction of GST.

West Bengal Finance Minister Amit Mitra had recently said that the dues owed to the states and three UTs with Legislative Assemblies totalled about Rs 40,000 crore. But that was only for two months.

Punjab had to receive Rs 2,100 crore in GST compensation and together with Rs 2,000 crore arrears its total dues were Rs 4,100 crore till September end.

GST comprises nearly 60% of the tax revenues of states. Many states are already facing deficits up to 50% of the total GST.

As a result, states are facing acute pressure on fiscals with some already resorting to ways and means or even overdrafts, the finance ministers had recently conveyed to the union finance minister.

Punjab Finance Minister Manpreet Singh Badal has said his state may approach the Supreme Court if the Centre fails to release the GST compensation to the state.