FM assures states of GST dues soon

FM Nirmala  Sitharaman assures states of GST dues soon

Union Finance Minister Nirmala Sitharaman from four states and officials from four others on Wednesday asked the government of the union to pay compensation for the implementation of the Goods and Services Tax as they face financial difficulties.

      The appeal comes at a time when the center's revenue collection numbers have raised serious concerns, forcing the federal Indirect Tax Authority, the GST council, to call a meeting later this month to explore ways of boosting collections, including raising tax rates.

     Finance Ministers from Delhi, Punjab, Madhya Pradesh and officials from Kerala, Rajasthan, Chhattisgarh and West Bengal met with Union Finance Minister Nirmala Sitharaman to discuss their grievances over the delay in the payment of GST compensation.   

        Sitharaman later told reporters that she had heard their views and approved the letter, but did not say when the payments would be cleared. Punjab Finance Minister Manpreet Singh Badal told reporters after the meeting that the August and September GST payment had not been issued. "We discussed this issue with the Finance Minister of the union. Compensation will also be due for the next period (October-November). The central government is obliged to pay. "Badal said Sitharaman had assured her that she would be released as soon as possible, although no timeline had been given.

    Deputy Chief Minister of Delhi Manish Sisodia said in a statement later in the day that states were promised payment for five years to compensate for their tax revenue shortfall in the GST period. He also highlighted in a letter presented at the meeting how GST collections were under pressure due to a general slowdown in the economy. Sisodia said that the center owes 3,642 crore in compensation fees to the government. 

   In November, GST revenue receipts reversed the trend of contraction, witnessed in the previous two months, and crossed the 1 trillion mark, according to official data. Recovery of indirect tax receipts for November is good news for policymakers who have taken steps to improve the system's stability and fuel demand to combat a deep economic slowdown. Central and state governments raised 1.03 trillion in November, up 6% year-on-year. In addition, even the cessation imposed on goods on the highest slab of 28% is not adequate to compensate the Member State for the lack of revenue due to the slow collection of GST.

    The Center must either set up collections from termination or find a new source of revenue to compensate for the state's revenue shortfall. The cessation proceeds are not part of the tax revenue pool of the center, which is shared with the member state, as suggested by the finance commission. The GST revenue receipts remaining below the target has lead to problem in the relationship between the center and the state, which has now resulted in a debate on how the 15th finance commission would plan to share the tax revenue of the center with the states for the duration FY22-FY26. The member states have rejected the FFC's suggestions for a review  of the compensation package. FFC President N.K. last month. Singh had sought leverage with the GST council, arguing that tax cuts and the granting of exemptions judged purely by the council had an impact on the FFC's objective of optimizing the center's and states revenue targets, Mint reported on 22 November.