T Harish Rao demands of the Union government to immediately release Rs.5,420 crore towards GST compensation

Finance Minister T Harish Rao on Thursday demanded of the Union government to immediately release Rs 5,420 crore towards GST compensation and another Rs 2,700 crore towards IGST dues to the State.

“The Union government is morally bound to compensate any revenue shortfall due to lockdown. Under the Central Goods and Services Tax Act, states were guaranteed payment for any loss of revenue in the first five years of GST implementation from July 1, 2017. Hence, the Union government is bound to compensate the revenue shortfall of Rs 5,420 crore to Telangana. States have lost 60-70 per cent of their revenue by joining the GST regime,” the Minister said, adding that the Centre, at the 7th, 8th and 10 GST Council meetings, had assured that the shortfall will be compensated even if it had to take it from the Consolidated Fund or by taking a loan.

Harish Rao was participating in the 41st Goods and Services Tax (GST) Council meet called to discuss compensation for states for revenue shortfall due to Covid-19. Finance Minister Nirmala Sitharaman chaired the meet which was also attended by Union Minister of State for Finance and Corporate Affairs Anurag Thakur and Finance Ministers of all the states and union territories via video conference.

Stating that there was no need to discuss the issue any further, the Minister said the Centre was depositing the leftover Cess amount in the Consolidated Fund and utilizing it. “It is absurd for the Centre to ask the States to borrow when the Cess amount falls short,” Harish pointed out. Reiterating his demand for compensation to States, he said if the States have to borrow, then they will be forced to pay different rates of interest and issues such as FRBM



limits and duration of repayment will arise.

“The Centre must borrow and compensate so that the interest rate is minimum. No one exactly knows how long the impact of Covid-19 will be on the economy. No one knows the quantum of revenue shortfall, and hence, the Union government must continue paying GST compensation once in two months,” he said.

Finance Ministers from several States were in complete support of Telangana’s point of view.

He demanded that the Finance ministry pay Rs 2,700 crore Integrated Goods and Services Tax (IGST) due to the State. “The sub-committee under Susheel Modi must meet and prepare guidelines for the payment of these dues immediately,” Harish demanded, adding that Telangana State which contributes maximum GST, received the least. So far, Telangana has paid Rs 18,082 crore to the Centre, but has received only Rs 3,223 crore, he pointed out.

He said Telangana received only Rs 169 crore in the first year of implementation of GST, nothing in the second year and negligible amount in the third year. “This year, if you further decrease the amount on account of GST shortfall and Covid, States like Telangana will be at a loss,” he said.

“The present attitude of the Centre helping only those States that faced natural calamities and forgetting progressive States like Telangana is detrimental to its growth,” he asserted and pointed out that the State was also discriminated against by the 15th Finance Commission in allocation of funds.

State Chief Secretary Somesh Kumar and other officials from the Finance and Commercial Taxes department participated.