GST compensation shortfall: Govt can't pass the buck to states, says Jairam Ramesh

Parliament passed a law that Centre will compensate states for GST shortfalls for 5 years. Centre is now passing the buck to states telling them they should borrow to make up shortfalls. This is abdicating Centre's legal obligations. Pathetic! States should oppose tooth and nail.

Jairam Ramesh (@Jairam_Ramesh) August 28, 2020

Following the 41st GST council meeting on Thursday, the government placed two options before the states: to provide a special window to the states, in consultation with the RBI, for the borrowing of Rs 97,000 crore at a reasonable interest rate, which can be repaid from cess collection after five years of GST implementation, ending 2022; or to borrow the entire Rs 2.35 lakh crore GST revenue shortfall under the special window.

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Ramesh also came down heavily on the Centre in another tweet, citing a media report which cornered the government for pinning much of the responsibility for GST compensation delays on COVID-19 pandemic, revealing that the payment backlog preceded the coronavirus shock by almost a year.

The report, published in the Indian Express, said the Centre delayed GST compensation payments to states by almost a year - when payments due for August-September 2019 were pushed. The delay trickled down to subsequent payouts that followed.

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The report further added that the economic slowdown, which has been underway for around three years now, started to have a detrimental impact on GST revenue collections in August last year.

Thus, the GDP growth rate, consecutively, slowed from 5.2 per cent in April-June 2019 to 4.4 per cent in July-September, and further to 4.1 in October-December, and to 3.1 per cent in the January-March quarter. The slowdown in GDP growth rate reflected in gross GST revenue, which also decelerated in August to Rs 98,203 crore, to further contract by 2.7 per cent (year-on-year contraction) in September 2019 to Rs 91,917 crore, and posting a 5.3 per cent contraction in October to Rs 95,380 crore.

Citing this report, Ramesh asked the Finance Minister Nirmala Sitharaman if the downward trend in quarterly GDP growth numbers was "also an 'Act of God' or Act of Master Actor?"

Quarterly GDP Growth rates
Q2 2018-19 7.1%
Q3 2018-19 6.6%
Q4 2018-19 5.8%
Q1 2019-20 5.0%
Q2 2019-20 4.5%
Q3 2019-20 4.7%
Q4 2019-20 3.1%

Was this also an Act of God or Act of Master Actor, Madam Finance Minister? @nsitharaman https://t.co/f1j5uZJrkj

Jairam Ramesh (@Jairam_Ramesh) August 28, 2020