Telangana State reiterates that Union government must compensate States for their revenue shortfall

Telangana State on Monday reiterated that the Union government must compensate States for their revenue shortfall of Rs 2.35 lakh crore in the current financial year.

Participating in the Goods and Services Tax (GST) Council meeting chaired by Union Finance Minister Nirmala Sitharaman via video conference, State Finance Minister T Harish Rao was categorical in stating that the Centre must borrow the amount and distribute it among the States rather than States approaching financial institutions for loans.

It was during the last GST meeting on August 27 that States were given two options on compensation. The first option was provision of a special window in consultation with the Reserve Bank of India to provide Rs 97,000 crore at a nominal interest rate, and the second was for the States to bear the entire gap in revenue shortfall of Rs 2.35 lakh crore in consultation with the Apex bank.

Harish Rao, supported by other States, demanded that the meeting should first deal with the GST compensation issue before taking



up any other agenda item. He reiterated Telangana’s stand that States have the legitimate right to get compensated when there was revenue shortfall, particularly this time with the Covid-19 induced lockdown that shut down all economic activities in the State.

“The government has collected cess for six months and there are three installments pending to be paid to the State. This must be paid immediately,” he demanded. He also demanded immediate release of the Integrated Goods and Services Tax (IGST) dues to the States, and pointed out that Telangana was yet to receive Rs 2,638 crore of IGST share from the Centre.

While, Telangana, West Bengal, Kerala, Chhattisgarh, Delhi and Punjab were in favour of full compensation of GST shortfall to States by the Union government if required by borrowing, States such as Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh and Uttar Pradesh opted for the first option offered by the government.