Kerala Chief Minister Pinarayi Vijayan has written to Prime Minister Narendra Modi on the issue of GST compensation, requesting him to intervene and advise the Finance Ministry not to go ahead with the plans of transferring the burden of GST compensation on the states.
Vijayan said the government should instead follow the letter and spirit of the Goods and Services Tax (Compensation to States) Act, 2017 and the two borrowing options sent by the Ministry of Finance to the states should be withdrawn.
“I write this letter to convey the concerns of the Government of Kerala with regard to the hurdles in the payment of Goods and Services Tax (GST) compensation to the States. When GST was implemented it was agreed upon that the States would be assured of an annual compounded growth rate of 14 per cent in GST revenue with 2015-16 as the base year during the initial five years of implementation,” Vijayan wrote.
The letter stated that Section 7 of the Act says compensation shall be payable to the states and it shall be provisionally calculated and released at the end of every two months. “Unfortunately, since 2019-20, this provision has not been adhered to,” he added.
The chief minister said from April 1, 2020, no compensation has been released to the states. The amount due to Kerala from April to August of financial year 2020-21 is Rs 7,0000 crore.
“It is felt that transferring the obligation of GST compensation to the States through their borrowing is not in accordance with the spirit of understanding reached between the Centre and the States during the discussions preceding the constitutional amendment for bringing in GST,” the letter stated.
Several states such as West Bengal, Jharkhand and Punjab have complained to the Centre about no disbursement of GST dues, leading to issues such as payment of salaries, fighting the Covid-19 battle and day-to-day work of governments.
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