Finance Ministers and representatives of six states met with Union Finance Minister Nirmala Sitharaman on Wednesday expressing concerns over delayed GST compensation and submitted a memorandum over the same.
Finance Ministers of Puducherry, Punjab, Madhya Pradesh, Delhi and representatives from Kerala, Chhattisgarh, West Bengal and Rajasthan met the Finance Minister.
Nirmala confirmed the same during a cabinet media briefing on Wednesday saying that state finance ministers requested compensation be given at the earliest and that she will be looking into it.
Speaking after the meeting, Punjab FM Manpreet Singh Badal told the media that it is embarrassing to time and again come to Delhi to ask for money. “We cannot shut services, pensions, schools, etc. States have a huge responsibility and compensation is part of the law. Government of India is under the obligation to pay. We surrendered our financial sovereignty to the government, and we don’t like coming to Delhi time and again to ask for money,” he added.
As per a Business Standard report, Kerala’s outstanding compensation amounts to Rs 1,600 crore, while Rajasthan is owed Rs 4,400 crore, Punjab Rs 2,100 crore, Delhi Rs 2,355 crore, and West Bengal Rs 1,500 crore.
GST comprises nearly 60% of the tax revenues of states and hence the compensation plays an important role in the finances of the state, which are already hurt amid the economic slowdown. In fact, it was the assurance of GST compensation that made states agree to join GST.
While the ministers were assured on Wednesday of action, the Centre reportedly wrote to all states voicing concerns that compensation cess might not be enough to pay for losses arising out of GST.
The Centre asked states to submit suggestions on increasing GST collections either by increasing tax rates or other ways by December 6.
Reports suggest that the GST council meeting that is set to happen on December 18 could see a major revamp of the GST structure. The council will reportedly review the existing tax structure and compensation cess rates as part of a larger exercise to shore up revenue. The upcoming GST Council meeting is expected to focus on bringing exempted items under the tax net while considering changes in tax rates and compensation cess for other products, with the prime idea to boost GST revenue and prevent delays in payment of compensation cess to states.
Sources have told IANS that GST rates on several finished products may also see an increase as the Centre is also looking to correct the inverted duty structure where inputs and raw material attract higher duty than finished products.
Barring luxuries and a few other demerit items, levy of compensation cess on other items may also be considered by the council. It may also look at raising the cess on a few products. If this happens in case of automobile, it would be further bad news for the sector already struggling to maintain sales.