Kerala has opposed the Centre’s move to segregate the shortfall in compensation due to implementation of Goods and Service Tax (GST) as shortfall due to COVID-19 and the actual GST shortfall.
“Such a segregation is not legal. Even the legal opinion provided by the Attorney General does not have any reference on this. Kerala do not accept this segregation,” Finance Minister T.M. Thomas Isaac told a press conference after the 41st GST Council meeting chaired by Finance Minister Nirmala Sitharaman on Thursday.
The Finance Minister said the State was of the view that the Centre should take loan and provide GST compensation to the States. Instead of increasing the cess or extending the cess collection period, Dr. Isaac said taking loans by the Centre, instead of asking States to take loan, to provide the compensation was the best option.
Two options
On the two options for GST compensation mooted at the council, Dr. Isaac said the proposals would lead to financial loss for the State. The Centre was of the view that the State should be able to absorb the loss of income, he pointed out.
The first option was providing a special window to States, in consultation with the Reserve Bank of India, for borrowing ₹97,000 crore at a reasonable interest rate. The second option was to borrow the entire ₹2.35-lakh crore shortfall under the special window.
The State would give its reply to the proposals put forward by the Centre within seven days after holding consultations with Chief Minister Pinarayi Vijayan and other Ministers, he said.
The Centre was delaying the compensation for the past six months, he pointed out. The State could be paid ₹2.5 lakh crore compensation as the Centre had provided ₹21 lakh crore for Atmanirbhar Bharat, the Finance Minister said.
The Goods and Services Tax (Compensation to States) Act, 2017 provides the States with a guarantee that they will be paid for any loss of revenue in five years of GST implementation until 2022. The Centre is legally bound to pay the States if revenues fall below 14% annual growth in GST collections, using a base year of 2015-16.