NEW DELHI: Finance Minister Nirmala Sitharaman on Saturday said that the government will soon discuss with the GST Council the issue of the states’ compensation, as soon as the government has gotten the formal opinion of the Law ministry and after consultations with the Attorney General (AG). “The matter (GST compensation) was discussed in the last GST Council meeting and it was decided that a legal opinion should be taken.
After the law ministry gives its formal opinion, we will soon fix a date in consultation (with the) AG,” Sitharaman told reporters. An outcry over the states’ compensation under the GST system was triggered on Tuesday after the revenue secretary was reported to have cited the government’s inability to pay states in the near future at a Parliamentary panel meeting. This was followed by media reports stating that the legal opinion of the AG suggests that the Centre does not have the obligation to pay, which created outrage among state governments.
“AG’s opinion seems to be that if there is no money in the cess fund it’s upto the GST Council to make appropriate arrangements. Fine. But the Centre has 1/3rd votes in the Council. No decision can be taken without its concurrence. So the question is, what is its stance? To pay or not to pay?” Kerala Finance Minister Thomas Isaac commented on twitter. Even Punjab Finance Minister Manpreet Singh Badal, in a letter to Sitharaman on Friday, stated that Centre had provided “innumerable assurances” in the run-up to GST for “assured and unhindered compensation”.
Even BJP ruled states have raised apprehensions. Under the law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16. The Centre released over `1.65 lakh crore in 2019- 20 as GST compensation. However, cess collected during 2019-20 was `95,444 crore. The compensation payout was `69,275 crore in 2018-19 and `41,146 crore in 2017-18.