Kerala not to budge on GST compensation issue

Thiruvananthapuram: The state government is to adopt an uncompromising stand in the matter of compensation for GST revenue shortfall. At the meeting schedueld for Monday of the GST Council, Kerala is expected to argue that it is a matter of states' right to receive from the Centre the shortfall in revenue as compared to pre-GST taxes raised by the states.

Kerala had earlier tried to reach a consensus of different states on this issue. The Centre has been arguing that the recent fall in tax revenue is mostly because of economic slump as a result of Covid-19 and the lockdown, and that the Centre is not liable to compensate that component of the revenue loss.

However, Kerala disagrees with the Centre's line and will not accept the Centre's move to make another accounts statement in the name of the pandemic. Dr Thomas Isaac, representing Kerala, will convey the state's position in this. The state is also preparing to approach the GST Tribunal if its stance is not accepted.

Sources in Delhi indicate that when states meet on Monday in the background of states being impoverished by fall in tax revenue and the resultant financial crisis, the meeting is likely to be acrimonious. Opposition-ruled states are already up in arms against the Centre for refusing to pay the dues to the states, even during pre-Covid period.

The states have lost a GST revenue of Rs 2.35 lakh Crore during the current year. But the Centre is of the stance that the states should not expect to be compensated for the entire amount as GST compensation. The Centre explains that out of this amount, only Rs 97,000 Crore can be accounted for under GST loss and the remaining deficit is attributed to the Covid crisis.

Therefore, the Centre maintains, it can help the states in two ways: either by facilitating a loan of Rs 97,000 Crore via Reserve Bank of India, or by arranging the entire Rs 2.35 lakh Crore to be raised as loan from the market.

The states ruled by Opposition reject this proposal and hold that the Centre cannot impose the debt burden on the states instead of bearing the burden by itself. The GST council consists of central and state finance ministers.