Kerala Finance Minister Thomas Isaac spoke to NDTV today over the GST compensation row (File)
Thiruvananthapuram:
Amid the ongoing tussle between centre and states over GST compensation during the Covid pandemic, Kerala Finance Minister Thomas Isaac has accused the central government of “undermining (the) federal structure” of the country and destroying its relationship with states.
Today finance ministers from at least five opposition-ruled states, including Kerala, Bengal, Chhattisgarh, Delhi and Puducherry, are meeting via video link to further discuss the issue.
Mr Isaac criticised the centre over its handling of the GST situation and said state governments had been left with “no time to understand or react” to re-payment proposals made after last week’s meeting of the GST Council – a video conference chaired by Union Finance Minister Nirmala Sitharaman.
“They are destroying the essential trust between centre and states. How can we trust them? They made the proposals for states right at the end of the conference, leaving us no time to understand or react,” Mr Isaac told NDTV.
“People have lost any sense of grace and statesmanship. You are dealing with state governments. We are as much a part of the federal system as the union government,” he added.
Last week Ms Sitharaman said the pandemic – an “act of God” – had hurt GST collection; she said the total shortfall for fiscal 2021 was Rs 2.35 lakh crore.
The centre said states could either borrow the Rs 97,000 crore owed in GST compensation or the Rs 2.35 lakh crore that included impact of the pandemic.
The centre said states would be given seven days to pick their option.
Finance Minister Nirmala Sitharaman said the pandemic, which hit GST collection, was an “act of God”
States have pointed out these options will affect receipts after 2022, as they will have to repay these loans from future tax collections.
“I heard states have to borrow Rs 97,000 crore but I was under the impression that the rest of the money was going to be borrowed by the centre and given to the states. Now I understand that the centre is going to refuse to give what they call “loss due to Covid”. This is absolutely silly,” Mr Isaac declared.
“When states gave up their entire right to tax, there was only one thing we insisted – that full compensation must be given for four to five years. Now we are told Covid is an “act of God”? Whose act was note ban (a reference to demonetisation) that pushed the economy backwards?” he asked.
States were guaranteed payment for loss of revenue from taxes in the five years after the GST (goods and services tax) was enforced in July 2017.
The centre, however, is struggling to pay dues to states whose economies have been hit by the lockdown. GST collections, including cess compensation to states, had been falling short even before the pandemic.
The Congress called the “withholding” of GST dues a “sovereign default” and going back on constitutional guarantees, which was the reason states came on board with the GST plan in the first place.
The government’s top lawyer, Attorney General KK Venugopal, said the centre had to compensate states fully for loss of revenue in GST during the pandemic.
The centre has, however, claimed that it has no such obligation if there is a shortfall in tax collections.
