State Governments are determined to drive a hard bargain
Opposition-ruled state governments are determined to drive a hard bargain in the special Goods and Services Tax (GST) Council meet to be convened soon to decide whether and how a compensation mechanism for their ‘revenue shortfall’ be extended beyond June 2022, when a five-year initial window ends.
At least six states – West Bengal, Kerala, Chhattisgarh, Punjab, Tamil Nadu and Odisha – are seeking an extension of the compensation period and the relevant cesses on various ‘demerit’ goods.
States reckon that the actual shortfall during the five years to June 2022 is much higher at Rs 3.9 lakh crore or thereabouts (Rs 1.8 lakh crore in FY21 and Rs 2.1 lakh crore in FY22). States have also suffered from the delays in release of the compensation amount – as per the Act, states’ loss of revenue requires to be compensated at the end of every two months, but this schedule hasn’t been strictly adhered to, forcing them to take loans.
As GST revenue has not stabilized yet, and state finances are reeling under numerous stresses of Covid-19 uncertainties and natural calamities, I would also urge you to extend the compensation period for another five years beyond July, 2022,” West Bengal finance minister Amit Mitra wrote in a letter to union finance minister Nirmala Sitharaman last week. “We have suggested an extension in the GST compensation for 5 years,” Rajesh Kumar Singh, additional chief secretary (finance), Kerala government told FE.
