Upping the ante further, Chief Ministers of six non-BJP-ruled dispensations have written to the Centre to remind it of its "constitutional", "moral" and "legal" responsibilities in the stand-off over the Rs 2.35 lakh-crore shortfall in GST compensation and financial relief due to the States. The States reminded the Centre it had a legal duty to reimburse States' loss of revenue in the first five years of the GST regime.
The letter comes after Finance Minister Nirmala Sitharaman last week dubbed the pandemic an "act of God" and said it had hurt GST collection. She said the total shortfall for fiscal 2021 was Rs 97,000 crore and, including compensation because of the pandemic, states were owed Rs 2.35 lakh crores.
The Centre asserted that these dues would be cleared but not before saying that it wanted to stay clear of avoidable borrowing when it could be done at the States’ level from the markets. However, the States said this would affect tax receipts after 2022, as they would have to repay loans from future collections.
The letters written by West Bengal Chief Minister Mamata Banerjee, Kerala CM Pinarayi Vijayan, Delhi CM Arvind Kejriwal, Tamil Nadu Edappadi K Palaniswami, Telangana CM K Chandrasekhar Rao and Chhattisgarh CM Bhupesh Baghel called on the Centre to reconsider its stance of asking states to meet the shortfall by borrowing from the markets. Other CMs who are in process of writing to the Centre are Punjab CM Amarinder Singh his Rajasthan counterpart Ashok Gehlot, according to sources.
In her letter, Banerjee said the "GST imbroglio" amounted to a "betrayal" of trust and reminded Prime Minister Narendra Modi that in December 2013 the sole reason why BJP was opposing GST was because it did not trust then government of India in honouring GST compensation to states. "Today (those) words are ringing true in our ears as we are losing our trust in the BJP Government at the centre," the Bengal Chief Minister wrote.
Banerjee pointed out the Centre's repayment options required States to borrow money at a time when many are unable to pay salaries to employees. The centre, she said, was better placed to borrow since it would incur a lower rate of interest than States.
The Kerala CM reminded the Centre that "it was agreed upon that States would be assured of an annual compounded growth rate of 14 per cent in GST revenue... during the initial five years". "From April 1, 2020, no compensation has been released to the states," he added.
Delhi Chief Minister Arvind Kejriwal said it was an extremely onerous burden on States already reeling under financial crisis due to shortfall in revenue collections and increased commitment of expenditure from COVID-19 response. Kejriwal too said assurance of compensation to meet shortfall in collections was one of the pillars on which the entire GST edifice rested.
Tamil Nadu Chief Minister Edappadi K Palaniswami, whose party is an alliance of BJP, said that Macro-economic indicators count "overall general Government deficit and borrowing" and not who borrowed while Telangana Chief Minister K Chandrasekhar Rao expressed concern over “the Centre abdicating its responsibility of compensating states”. And Chhattisgarh Chief Minister Bhupesh Baghel wrote: “You are well aware that as per constitutional provisions the centre is accountable for providing GST compensation,"