GST stuck in deep crisis, Center doesn’t have money to compensate states

In almost three years from its inception, the much-hyped Sistas Goods and Services Tax (GST) of ‘one country one tax’ has been caught in deep crisis. For the primary time, the Central Government has publicly acknowledged that it doesn’t have the cash to share the states under the law prescribed under GST. The GST system was implemented on 1 July 2017.

Significantly, in August 2019, long before the Corona crisis or lockdown, the country’s financial condition was so bad that even half the share given to the states couldn’t be achieved. In such a situation, there are just one thanks to either increase the tax on some items or bring the products covered under the exemption under GST.

Significantly, members of opposition parties of a parliamentary committee on financial matters are agitated over an alleged statement by Finance Secretary Ajay Bhushan Pandey. The Congress and other parties, who attended the primary meeting of the Committee on Financial Affairs, led by BJP leader Jayant Sinha, said that Ajay Bhushan Pandey has told the committee that, “As per the principles laid down within the Central Government GST formula, now the states Not during a position to share.’

This meeting was pending for an extended time. W
within the meeting, members of opposition parties raised the difficulty that for the last several months, the central government isn’t giving the share of states, thanks to which they’re facing many problems.

According to the GST law, it had been decided that the loss of revenue to the states are going to be compensated by the implementation of this technique. Considering the bottom year 2015-16, it had been decided that this may be calculated assuming 14 percent growth within the Protected Revenue of the states per annum. Until the transition period of 5 years, the central government will give compensation amount to the states twice a month. But the catch is that the GST law states that each one compensation to the states is going to be given from the GST fund.

Former minister of finance Arun Jaitley had said, “If there’s a shortfall within the revenue pool, the GST Council can find how to beat it.”

Opposition parties say that especially those states are currently facing an enormous financial crisis, which has got to spend heavily to affect Corona, help migrants, and take away unemployment. Opposition parties are very angry with the statement of the Finance Secretary. He says that ‘how can the govt back its accountability to the states.

A member of this committee told Aaj Tak-India Today, ‘The central government was during a hurry to implement the GST law. Now the shortage of resources suggests that this law was brought during a hurry and implemented incorrectly. The depression caused by this epidemic has exposed its drawback and therefore the central government never understands the way to handle things.

According to sources, the Finance Secretary has told the committee that there are such provisions within the GST Act, consistent with which a replacement formula is often made to offer compensation to the state governments. The ultimate decision during this regard is to be taken by the GST Council and its next meeting was to be held in July itself, but it’s not been done yet.

The Finance Ministry has said during a statement that the govt has released Rs 13806 crore for GST compensation for the month of March within the fiscal year 2019-20. The govt says that the entire compensation for the fiscal year 2019-20 has been given.

According to a background note prepared by the govt, within the current fiscal year i.e. 2020-21, the central government has released Rs 15,340 crore as GST compensation to the states and union territories, while the GST collection has fallen drastically thanks to the Corona crisis.

According to sources, within the fiscal year 2019-20, the central government has released Rs 120,498 crore as GST compensation to the states, whereas it’s received just Rs 95,000 crore as compensation cess. Earlier, in 2018-19, the central government achieved compensation cess of Rs 95,081 crore and gave Rs 69,275 crore to the states. Similarly, in 2017-18, the middle achieved compensation cess of Rs 62,611 crore and released Rs 41,146 crore to the states. During this way, till March 31, 2019, the govt had Rs 47,271 crore left from this item.

Long before Corona, 2019, the govt realized that compensation cess collection isn’t enough to offer compensation to the states. Compensation cess collection was increasing from Rs 7,000 to 8,000 crore monthly, while the states had to pay Rs 14,000 crore monthly. However, it also has its limitations. Albeit the govt increases compensation cess on some items, the revenue will increase by only Rs 2000 to 3000 crores annually.

Sources say that till November 2019 all states got full compensation cess and there was no discrimination with any state. It’s passed on to the states during a transparent manner.