Another round of unrest around GST

Centre's decision to introduce Special Window coordinated by Finance Ministry for borrowing to meet requirements in the absence of GST compensation initiated another round of uneasiness regarding Goods and Service Tax (GST).

Last week Maharashtra Chief minister Uddhav Thackeray asked the centre to honestly admit if system of GST has failed and to revert to old system of taxation. He called chief minsters of other states to join the cause and to discuss the matter with Prime Minister in order to sort out the crisis.

Total of 2.35 lakh crore GST compensation shortfall has been estimated for 2010-21. Centre borrowed and distributed 6,000 crores as the first tranche to 18 states and UTs under Special Compensation Window.

Interest rate fixed at 5.19 per cent and intend to make weekly release of 6,000 crores to states, Finance Ministry informed. Principal amount and interest of the borrowing will be dealt from future GST cess collections.

Concerns regarding GST compensation in the time of pandemic casting perplexity between centre and states for last few months. Since April, GST compensation to meet the loss of revenue failed to dispense from Centre. Since then states were constantly demanding for timely repayment especially in a time to meet the pandemic hit economy. Previously, Chief Ministers of several states including that of Kerala, Bengal, Tamil Nadu and Telangana has rejected the repayment options proposed by the ministry.

Thomas Isaac, Kerala Finance Minister asked the centre to borrow entire amount and criticised centre Finance Minister for not discussing relevant parts in GST Council before making final decisions.

"To implement option 1 (special window for borrowing) without GST Council formally deciding on the extension of compensation payments beyond 5 years is illegal. GST Council should be convened and search for consensus continued", He tweeted.

Kerala chief minister Pinarayi Vijayan in his letter to Prime Minister advice to relook at the compensation mechanism. "It is felt that transferring the obligation of GST compensation to the states their borrowing is not in accordance with the spirit of understanding reached between the centre and state during the discussions preceding the constitutional amendment for bringing in GST", he informed.

Telangana Chief minister K Chandrasekar Rao observed delay in compensatory payment as against the GST Compensation act which directs payments in bi-monthly basis to meet loss of revenue.

GST collection in April this year is 81,693 crores less than April 2019. Data for August month shows a better revenue collection and the decrease compared to august last year stands at 11,753 crores.