GST compensation: KCR requests PM Modi to reverse 'states should borrow' decision

On Tuesday, Telangana CM K Chandrasekhar Rao urged Prime Minister Narendra Modi to reverse the decision of asking states to meet the shortfall in GST compensation through borrowings. Maintaining that it was imperative to strengthen cooperative federalism in this crisis situation, he stressed that development in any part of the country shall contribute to India's development. Rao suggested that the Centre can borrow the shortfall amount on the strength of receipts into the cess amount.

He added that the entire debt servicing can be paid from the cess collected for an extended period decided by the GST Council. Recalling that all decisions have been taken unanimously by the GST Council so far, the Telangana CM expressed hope that this tradition would continue in the future as well. Additionally, he exuded confidence in the PM looking at the proposed alternative in a positive manner. Apart from Telangana, other states such as Kerala, Chhattisgarh, West Bengal and Rajasthan have also rejected the Centre's options on bridging the GST compensation gap.

Read: Tamil Nadu CM Writes To PM Modi Over GST Compensation Of States; Cites Difficulty

Read: Chhattisgarh CM Writes To FM Sitharaman Opposing Centre's Options For GST Compensation

Rao opines on GST compensation

In the letter addressed to the PM, Rao stated that his government had supported the introduction of GST in the national interest. Citing the provisions of the GST Compensation Act, he complained that there have been long delays in the payment of compensation and that the states have not been paid GST compensation since April 2020. According to him, the Centre's attempt to make a distinction between the loss of revenue on account of GST implementation and the impact of COVID-19 was not provided for in the GST Compensation Act.

Observing that the states have yielded more fiscal space to facilitate the introduction of GST, he lamented that the Centre was denying them their legally rightful claims during the COVID-19 period. Moreover, the Telangana CM mentioned that the expectation of the states on the share of cess and surcharges coming down has been totally belied. Noting that the states are at the forefront of reviving stalled economic activities amid the pandemic, he claimed that they need more resources than the Centre. Rao contended that the Union government was abdicating its responsibility of fully compensating the states by taking recourse to legal opinion. 

Read: Asking States To Borrow Is 'skewed Idea': Deve Gowda On GST Shortfall

Read: Rajasthan Govt Asks Centre To Release Pending GST Compensation Worth Rs 6,690 Cr