GST compensation: Centre committing ‘sovereign default’ by not paying pending dues to states, says Congress

Business & Economics

Congress leaders demanded that states should be compensated for the estimated Rs 6 lakh crore loss in revenues due to the COVID-19 pandemic

New Delhi: The Congress on Tuesday accused the Centre of committing a “sovereign default” by not paying GST compensation to states as mandated under the law and demanded that they be compensated soon.

Addressing a joint press conference, party leaders Rajeev Gowda, Manpreet Badal and Krishna Byre Gowda also demanded the states be compensated for the estimated Rs 6 lakh crore loss in revenues due to the COVID-19 pandemic.

Ahead of the 27 August meeting of the GST Council, the Congress leaders demanded that states be paid on time the compensation of 14 percent as mandated by the GST Compensation Act.

“Anything less is a betrayal of the faith of India”s states,” they said in a joint statement.

Addressing a virtual press conference, Badal, who is Punjab’s Finance Minister, said the Centre owes Rs 44,000 crore in pending GST dues to the state which is hampering their governance.

He said the Government telling the Parliamentary Committee on Finance that there is no obligation on its part to pay compensation to states “amounts to sovereign default”.

India is not a “Banana Republic” to say that it is not mandatory, he stated.

“I think, there is a breach of Constitution as far as not being able to pay compensation (is concerned),” he said. “The BJP government has no respect of the Constitution, the institutions and the people of India”.

Badal also informed he has written to Finance Minister Nirmala Sitharaman urging her to activate a dispute resolution mechanism on GST-related issues.

“It can’t be your word against my word. There must be, in the case of a dispute or a conflict, a dispute resolution mechanism. The constitution of the GST council provides for that,” he said.

Once this mechanism is activated, states would have the right to approach the Supreme Court and take a legal recourse in case any grievance, he said.

He also said as per the GST law, there should be a Vice-Chairman of the Council which according to political propriety should be from an opposition state, because it is felt that the agenda for GST council meeting is created by the government and its bureaucracy.

Rajeev Gowda said the state is at the forefront of the fight against COVID-19 and they should be compensated by the Centre.

“It is shocking to know that instead of taking steps to help states, it is preparing grounds for betrayal. It is replacing cooperative federalism with coercive federalism,” Gowda claimed.

He said the Centre is about to execute another “devastating U-turn” as Prime Minister Narendra Modi had “promised” during the enactment of the GST that states would be compensated.

“Only on this basis, states gave up their constitutional powers of taxation and the GST regime was born. Starving states of funds has been the official policy of this government,” he alleged.

The Congress leader said any borrowing that needs to be done to help tide over the COVID-19 crisis must be done by the Central government.

It can raise resources at a lower cost and can bear the debt burden better than states, Gowda said.

He also sought a reduction on the reliance on cesses and share the revenues fairly. “It is high time that the centre-state fund sharing formula from Finance Commissions becomes a reality.”

Former Karnataka Finance Minister Krishna Byre Gowda said the absence of help from the Centre is creating havoc in governance and delivery of essential services.

He said the Centre owes Rs 13,000 crore to Karnataka.

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