Dismissing outright the options offered by the Union government for GST compensation to states, Punjab finance minister Manpreet Singh Badal on Monday rejected the Centre’s two option formula for GST compensation and sought review of the decision.
In a letter to Union finance minister Nirmala Sitharaman, Badal said the decision, taken at the last Goods and Services Tax Council (GSTC) meeting, was a clear breach of the solemn and constitutional assurance by the Central government.
He said that it would be considered a “betrayal” of the spirit of cooperative federalism that formed the backbone of the GST journey so far.
“Punjab would like full clarity on each of these issues and the matter once again placed on the agenda in the next meeting of GSTC,” the minister demanded.
Badal also suggested forming a Group of Ministers (GoM) to deliberate on the matter and make recommendations on it in a timebound period of 10 days.
He drew attention towards the statements of the then Chairperson that the compensation would be 100 per cent of the revenue loss and it would be paid within the stipulated period of five years. “It is the Central government that has the obligation to pay,” Badal said.
The Covid-19 pandemic has impacted different countries differently and within India different states differently. Punjab is primarily an agrarian state and restricting compensation uniformly for all states is devoid of sound logic, Badal said..
He said Punjab was now the highest GST-deficit state in the country. The state’s revenue loss would still remain unpaid even after availing its share of the special window as well as the additional 0.5 per cent of the fiscal deficit.
“It is also not clear when the impact of Covid-19 would be tapered off. The states should also have clarity about the scenario likely to emerge if they continue to follow a similar approach going forward. How will compensation be calculated in the period after January 2021?” he asked.