Mamta writes letter to PM Modi, calls non-payment of GST dues attempt to 'undermine federalism'

West Bengal Chief Minister has written a letter to Prime Minister Narendra Modi expressing displeasure over the non-payment GST compensation to states.

Calling it an attempt to "undermine federalism", she said it was a travesty and an abrogation of the fundamental basis on which the states gave up 70 per cent of their taxing powers to usher the GST regime.

Banerjee asked the prime minister to not allow an insufferable blow to the federal polity of the nation by depriving the states of the GST compensation.

She also reminded PM Modi that when he was the chief minister of Gujarat, he had opposed the implementation of GST on several grounds.

Banerjee added in her letter, "Late Shri Arun Jaitley also unambiguously and publicly stated, in December 2013, that the sole reason why BJP was opposing the GST implementation is that BJP did not trust the then Government of India in honouring compensation of GST, losses to the states!".

The West Bengal CM has joined five other non-BJP ruled states that have written a letter to the union government to remind it of its "constitutional" responsibilities in the stand-off over the shortfall in GST compensation cess.

On August 31, the union finance ministry had offered two options to the states in order to make up for an estimated Rs 2.35 lakh crore shortfall in the GST revenues.

The two options given to the states were: one, to borrow either Rs 97,000 crore at a reasonable interest rate. The Centre said the amount could be repaid in 2022 (ending of five years of GST implementation) from cess collection.  Second, to borrow the entire Rs 2.35 lakh crore shortfall under the special window.

The government said that of the total shortfall, Rs 97,000 crore is due to GST rollout and the remaining is on account of the COVID-19 impact on the economy.

Banerjee, along with CM's of four other non-BJP states--CM Pinarayi Vijayan (Kerala), CM Arvind Kejriwal (Delhi), CM Edappadi K Palaniswami (Tamil Nadu), CM K Chandrasekhar Rao (Telangana) and CM Bhupesh Baghel (Chhattisgarh) rejected both these options.

Instead, Banerjee asked the Centre to borrow money to compensate for the GST compensation shortfall to states. The 65-year-old chief minister pointed out that the government of India had the power to monetise its debt while the states do not.

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Also read: GST revenue collection in August stands at Rs 86,449 crore