Tamil Nadu has received Rs 6,229.05 cr as GST compensation shortfall under the special borrowing window by the Union government on behalf of states.

Finance minister Nirmala SitharamanFile image/PTI
news Finance Tuesday, March 09, 2021 - 16:32

Tamil Nadu is being driven to debt, said DMK Rajya Sabha MP P Wilson, on account of the state having to borrow its GST compensation owed by the Union government. “TN is driven to borrow  Rs. 6,229.05 crore as the amount payable to TN towards balance GST Compensation of Rs 6,241 cr for the period April-May, 2020 and for the full period June’20 –Jan’21  is not paid by Center,” he said in a tweet on Tuesday. He also attached a Rajya Sabha answer by Union Minister of State for Finance Anurag Thakur to questions he had asked pertaining to the grants given to the state and money owed.

Wilson had asked the Ministry of Finance to submit details on whether the Union government has released the pending GST compensation amount to Tamil Nadu.

For the bi-monthly period of April-May 2020, Anurag Thakur said that Rs 2,967.93 crore has been released as part payment. “The balance GST compensation for the period April-May 2020 and GST Compensation for the full period June ‘20-January'21 is pending to Tamil Nadu along with all other states/UTs due to inadequate amount in GST Compensation fund during the current financial year,” the response added.

The reply from the minister further stated that in order to meet the shortfall of Rs 6,241 crore that is pending to be released to Tamil Nadu as part of GST compensation, the Union government has released Rs 6,229.05 crore as a loan to the state.

Under the GST Act, compensation for shortfall in GST collection is payable by the Union government for the first five years of the operations of the tax system — from July 2017 to June 2022. However, due to the pandemic and the lockdown leading to an estimated shortfall of Rs 1.10 lakh crore in collections, the Union government had given states two options to choose from.

Under the option chosen, the Union government set up a special borrowing window in October 2020 to meet the shortfall. The borrowings are done through this window by the Union government on behalf of states and UTs. Nineteen rounds of borrowings have been completed so far starting from October 23, 2020, and it is under this that the state has received Rs 6,229.05 crore.

In response to the question whether the amount recommended by 14th Finance Commission were for rural and urban local bodies was released, the Union government said that of the Rs 17,009.74 crore allocated for local bodies in Tamil Nadu for the years 2015-20, it has released Rs 14,431.76 crore.

The reply by the minister also pointed out that as per recommendations of the 15th Finance Commission, the budget estimates of tax devolution was at Rs 32,849.34 crore, but the revised estimates of tax devolution to Tamil Nadu for the year 2020-21 is Rs 23,039.46 crore. Of the revised estimates, the Union government said it has released Rs 18,609.83 crore till February 2021. The Union government also allocated Rs 8,009 crore as grants to Tamil Nadu based on the recommendations made by the 15th Finance Commission for the year 2021-22. 

Incidentally, Tamil Nadu Deputy Chief Minister and Finance Minister O Panneerselvam during his budget speech in February had pointed out that the share of central taxes for the state had been slashed by over Rs 9800 crore in the revised estimates. He also highlighted how the Union government’s decision to levy cesses and surcharges was reducing the state’s share of revenue.  “While some part of this reduction is attributable to the overall fall in Central tax revenue collection due to the COVID-19 pandemic, the shrinking of the divisible pool of Central taxes due to the increase in the share of cesses and surcharges is also a significant factor. I have already spoken about this issue earlier in my speech. I reiterate my call to the Government of India to merge cesses and surcharges with the basic rate of tax so that the States receive their legitimate share of the revenue,” he said.  

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