THIRUVANANTHAPURAM: Chief Minister Pinarayi Vijayan has asked Prime Minister Narendra Modi to direct the Union Finance Ministry to pay the GST compensation to states as envisaged in the law. The two options put forward by the ministry which transfers part of the burden to the states should be withdrawn, he said.
"I request your good self to intervene and advise the Finance Ministry not to go ahead with the plans of transferring the burden of GST compensation on the states and instead follow the letter and spirit of the Goods and Services Tax (Compensation to States) Act, 2017," Pinarayi said in a letter.
He cited the Finance Ministry's argument that part of the loss in GST revenue was due to COVID-19 and hence unprecedented. "The revenue loss and expenditure pressures have been much greater for the states and this artificial distinction that is being sought to be drawn would exacerbate the already severe fiscal stress of the states," he said.
The CM said that the compensation promised with a statutory backing was an important factor which prompted the states to accept uniform rate for supply of goods and services despite the rate fall inbuilt in the structure of GST.
"Transferring the obligation of GST compensation to the states through their borrowing is not in accordance with the spirit of understanding reached between the Centre and the states during the discussions preceding the constitutional amendment for bringing in GST. The two borrowing options sent by the Finance Ministry to the states on August 30, 2021, go against this and need to be withdrawn," the letter said.
From April 1, 2020, no compensation has been released to the states. The amount due to Kerala during the period April to August in 2020-21 is Rs 7000 crore, according to Pinarayi.
The Chief Minister's letter follows the meeting of six non-BJP ruled states on Monday which decided to take up the compensation issue with the Prime Minister. This is to expand the debate outside the realm of the GST council and project it as a challenge to federalism.