"Nothing Short Of Betrayal": Sonia Gandhi On Centre Not Clearing GST Dues

Congress president Sonia Gandhi has criticised the centre over not clearing goods and services tax that it owes to state governments, putting them in severe financial strain amid the coronavirus pandemic.

"In the meeting of the standing committee of finance on August 11, the Finance Secretary clearly said the central government is not in a position to pay their mandatory compensation of 14 per cent for the current year. This refusal to compensate states is nothing short of betrayal on the part of the Narendra Modi government, betrayal of state governments and people of India," Mrs Gandhi said today at a virtual meeting of chief ministers.

Under the law that governs goods and services tax or GST, states have been guaranteed payment for loss of revenue in the first five years since the GST came into force on July 1, 2017. This means states have been promised compensation for any revenue shortfall till 2022 - if they fell below 14 per cent annual growth since July 2017.

But most states have been complaining of not getting enough GST compensation and that too on time, putting them at risk of massive revenue deficit running into thousands of crores. Punjab, for example, is likely to see a revenue deficit of Rs 25,000 crore this year.

"There are a number of issues related to centre-state relations and since parliament is expected to meet in less than three weeks, I thought we should have an interaction so that we can have a coordinated approach. GST compensation seems to be a big issue. GST compensation being paid to states on time according to laws passed by parliament is crucial. But it is not happening. Dues have accumulated and finances of all the states are badly affected," Mrs Gandhi said.

Punjab Chief Minister Captain Amarinder Singh at the online meeting said his state may face a revenue deficit of Rs 25,000 crore this year. "We have spent nearly Rs 500 crore. We're in a situation where the finances of our states are completely down. Centre has not paid GST compensation. I agree with Mamata (Banerjee) ji that we should collectively meet the Prime Minister," Amarinder Singh said, referring to a suggestion by the West Bengal Chief Minister that they should jointly speak with PM Modi directly.

The government's top lawyer has also said it has to compensate states fully for the loss of revenue in GST during the coronavirus crisis. The Finance Ministry had asked Attorney General KK Venugopal a few key questions, seeking advice as it faces strident demands for compensation under GST, sources have said. The Congress has called it a "sovereign default" and going back on constitutional guarantees that had been the reason the states had come on board with the GST plan.

The BJP's own leader Sushil Modi, the deputy Chief Minister of Bihar, has said the Centre should borrow and pay GST compensation to states as it is "morally bound" to do so.

The Attorney General's response has reportedly caused anxiety in the Finance Ministry and also raised questions on the efficacy of the GST Act, which was dubbed a "game-changer".