FM Harish Rao demands Center to release Rs 5,420 crore GST compensation

Hyderabad: The Government of Telangana State has strongly opposed the proposal made by Union Finance Minister Nirmala Sitharaman that the States should borrow to make up for the shortfall in the tax revenues that have been compounded by the Covid-19 crisis which according to her was an ‘Act of God’.

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.

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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.

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“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.

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