Delhi Chief Minister Arvind Kejriwal on Tuesday wrote to Prime Minister Narendra Modi, urging him to consider more legally viable and sustainable options for providing Goods and Services (GST) dues to States to help them tide over the coronavirus (COVID-19) financial crisis.
The two options that are given by the Ministry of Finance which primarily require the States to borrow and then meet the repayment liabilities will put an extremely onerous burden on the States which are reeling under the financial crisis due to the shortfall in the revenue collections and an increased commitment of expenditure emerging from COVID-19 response, he said.
“The Goods and Services Tax (Compensation to States) Act, 2017, very clearly provides for compensation to States for loss of revenue arising on account of the implementation of the GST in pursuance of the provision of the Constitution (101st Amendment Act, 2016),” he said.
Kejriwal said that the GST Council should consider authorizing the Centre to borrow on its behalf and extend the period of collection of cess beyond 2022.
The GST council had on August 27 offered states with two options to tide over their revenue generated from GST shortfall as the cess collected from items such as cars and tobacco was not adequate to compensate them this financial year. The Centre specified that the state governments could borrow either via a special window it will facilitate through the Reserve Bank of India (RBI) or raise debt from the market.
Terming the GST reform as the landmark reform in the indirect tax structure of India, Kejriwal in the letter stated that the assurance of the GST compensation to states to meet the shortfall in tax collections is one of the pillars on which the entire GST edifice rests.
“The options proposed by the Centre will lead to a cumbersome process of borrowing by the States, crediting the debt amount to the GST compensation fund, to which legally all the compensation fund has to be credited in terms of the Section 10 of the GST (Compensation Act, 2017) and thereafter release of such funds as may be due to the States from the Compensation Fund,” he said.