Dewashish Upadhyay
The central government is backtracking on its promise to compensate the states for the impending reduction in revenue by implementing the new Goods and Services Tax (GST). The Finance Minister has given 2 options to the crisis-ridden states to either pay for this shortfall by borrowing from the Center or the states themselves borrow from the Reserve Bank of India. States have asked for a week’s time to consider both these options. Union Finance Minister Nirmala Sitharaman said that the GST collection has reduced due to Covid-19. Describing COVID as the ‘Act of God’ (Godly disaster), she said that there could be a shortfall of Rs 2.35 lakh crore in GST collection in the financial year 2020-21. Of this, only 97,000 crore rupees will be reduced by the implementation of GST, while the remaining amount of shortfall will be due to Corona epidemic. The Finance Secretary admitted that there is an outstanding of 1.5 lakh crore rupees from April to July for GST compensation of the states. The states have not received compensation for these 4 months in May, June, July and August. The central government told the Standing Committee on Finance that it does not have the money to pay compensation to the states.
GST was implemented through the 101st Amendment of the Constitution, which said that on the recommendation of the GST Council, the states will be legally compensated for 5 years which will result in loss of revenue from the implementation of GST. A surcharge was introduced in the law passed for this purpose as a source of income, but nowhere was it said that the income from this surcharge would be compensated. When the government decided to impose green cess on coal mining to compensate the states for the reduction in GST, it accepted the principle that compensation cess is not the only means of reimbursement of revenue reduction.
What is the meaning of compensation
Has anyone ever heard that an injured person borrowed compensation for the injury he received? Bihar Deputy Chief Minister Sushil Modi said that it is the responsibility of the central government to give compensation for the lack of revenue of the states.
Who will repay
To meet the GST deficit, the central or state will take any loan, the debt burden will increase on the public sector itself. The question is, who will repay the loan? The central government earns a lot due to various taxes. His ability to borrow is also high. On the contrary, states have to spend more, especially in social sectors. Due to the burden of additional debt on the states, their economy will be severely affected. For the sake of good federal relations, it would be appropriate not to force the states to take loans. To meet the shortfall in the GST collection, the Center should take a loan.
