Union govt in no mood to share GST revenue

August 15 2020

There is a huge infighting between the central and state governments over the sharing of revenue from GST, at a time when there has been a severe decline in all revenue receipts of governments in the Corona era. On Tuesday, the Union Finance Secretary, in a meeting of the Standing Committee of the Ministry of Finance, openly declared that the Centre was unable to give compensation to the states as per the revenue sharing formula, since the GST recovery has come down by 40 per cent. It is worth mentioning that the Centre was to give compensation of more than Rs 4 lakh 10 thousand crore to the states. One-fourth of the vote in the GST Council is with the Centre and remaining three-fourth of the votes reside with the states and at least three-fourth of the votes should be in favour of the motion to pass a resolution. Even if the Centre joins the support of its BJP-ruled states, it cannot reach the required majority, because there are still non-BJP governments in many states, even Nitish Kumar, who is running the government in Bihar with the support of BJP, is not willing to let go of the compensation. In such a situation, the only option left to the central government is to approach the Supreme Court on this issue. The Central Government had probably realized the dark times ahead for the country’s economy even before the Corona crisis came, perhaps that is why in March itself, the Central Government had sought an opinion on this issue from Attorney General KK Venugopal, and now Venugopal’s opinion also came to the fore. According to him, that the central government can refuse to give compensation to the states, which means that now the states will also have the option to go to court. Normally, the Centre gets a collection of one thousand crore rupees every month under the head of GST, but in July it had reached only 65 thousand crores, that is, even when the companies paid their old dues, taking advantage of the rebate given in the Corona period. It is worth remembering that in 2017, the Modi government, in its first term, announced the ‘one country, one tax’ policy in the midnight special parliament session, with the fact that the states are still collecting their own taxes, and the centre will provide 14 per cent additional revenue and if the states get less revenue than the stipulated amount, then the Centre will also give compensation to the states. The compensation has to be given to the states every five years i.e. compensation from 2017 onwards to be paid in 2022. During the Corona period, the financial condition of the states is already bad, and many states have no money left to pay their employees. In such a situation, compensation can be a great support for them.

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