Centre and State Government clashed over the GST revenue after non payment of dues to certain states. The recent report submitted by the 15th Finance Commission to the president created uneasiness among states. While states fear the reduction of the Centre’s revenue to states, the Centre focuses on to reduce expenditure.
Many states facing financial shortage blame the implementation of GST for decreasing revenues. The central government is required to compensate the states for any shortfall in revenue to keep annual revenue growth of 14%. Recently, the finance ministers of Kerala, Punjab, Madhya Pradesh, Delhi, and Rajasthan, demanded the compensation as soon as possible. In a meeting with the Union Finance Minister, they said that the states cannot cut their expenditure. Thomas Isaac, Finance Minister of Kerela, said that the state will not hesitate to approach the Supreme Court for the matter.
The compensation for four months is due and states are eligible for this compensation till 2021-22. Further, states demand the extension of the compensation period for three more years owing to the conditions. The payment due to states sum up to Rs 66000 crore whereas the center’s cess collection is just Rs 46000 crore.
Delhi Deputy Chief Minister and finance minister Manish Sisodia alleged the government for deliberately delaying the payments. He said that the center has about Rs 50,000 crore as cess collection. Though Nirmala Sitharaman assured them to be paid, she did not specify the time for the same.
The overall economic slowdown and low GDP growth rate poses a challenge for GST revenue. NK Singh, chairman of the 15th finance Commission, suggests that a simpler GST structure will prove beneficial. He said that the GST council and Finance Commission, both being constitutional bodies, must work with coordination. Further, he mentioned that the introduction of GST has made it difficult for the Finance Commission to make credible revenue projections. He further emphasized on the need to compensate states immediately as they account for 58% of the center’s expenditure.
GST revenue for the month of November crossed 1 lakh crore. However, revision of taxes is required to tackle the deficit. In all, the Centre has called up suggestions from states to review the tax rates and exempted items and is working on to increase the GST revenue.