Centres owes states Rs 2.35 lakh crore in GST compensation and Covid-related relief payments
The centre vs states stand-off over Rs 2.35 lakh crore due in GST compensation and Covid-related relief payments will be placed before the Attorney General, Finance Ministry officials told a parliamentary panel Friday afternoon.
The Attorney General - who will be consulted on this issue for a second time in around two weeks - will be approached after concerns were repeatedly raised by opposition MPs on the issue of how to pay out the compensation due.
The centre is struggling to pay the full amount - of which Rs 97,000 crore is GST compensation - because tax collections have been disrupted by the lockdown.
Last month Finance Minister Nirmala Sitharaman, in a meeting of the GST Council, described the pandemic as an "act of God" and said the centre's finances had been hit by the contraction in the economy.
On August 31 data revealed a 23.9 per cent contraction in GDP - the biggest in over four decades.
The centre, which has written to the states promising to clear these dues, then asked states to borrow from the market - either up to Rs 97,000 crore or the full amount.
However, a number of non-BJP ruled states hit back at this suggestion, pointing out that this would affect their tax receipts post 2022, as they would be forced to repay loans from future collections.
At least six non-BJP chief ministers, including Bengal's Mamata Banerjee and Kerala's Pinarayi Vijayan, wrote to the centre to remind it of its "constitutional" responsibilities.
The Congress lashed out, calling it a "sovereign default" and accusing the centre of reneging on constitutional guarantees that were the primary reason states agreed to sign up for the GST regime.
A number of opposition chief ministers also said they rejected the offered payment plans. Today the Finance Secretary told the parliamentary panel that it was still unclear which of the two options some of the states had opted for.
In August, Attorney General KK Venugopal was asked four questions by the centre on the issue of GST compensation; among these the centre asked if it was bound to pay in full despite a shortfall because of the pandemic.
"The centre is bound to pay the states full compensation irrespective of any shortfall," he said at that time.