Can’t borrow money, Punjab tells GST Council - ECAS Punjab

Can’t borrow money, Punjab tells GST Council

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Tribune News Service

Chandigarh, October 5

Punjab today told the GST Council it cannot borrow money, as suggested by the Government of India, for the shortfall in GST compensation by the Centre to states.

In case the Centre fails to release the compensation, the state will have to adopt "all other legal options at its disposal for dispute resolution with the Centre".

"We want our full compensation for the GST, as was promised to the state before the GST rollout," state Finance Minister Manpreet Singh Badal reportedly told the council.

The state has not received any compensation this fiscal, though half the financial year has passed. A sum of Rs 9,000 crore is due to the state (for April- September).

Talking to The Tribune after the GST Council meeting late this evening, Badal said since there was no headway in the deadlock between some states, including Punjab, and the Centre, his advice to Chief Minister Capt Amarinder Singh and other Cabinet colleagues would be to explore other legal options in case Punjab did not get its full GST compensation now and its demand for setting up a GST resolution mechanism was not accepted by the Centre.

"Punjab has lost 25 per cent of its revenue base because of the lockdown and subsequent economic downturn. It is unfair not to compensate the state in these hard times," he said.

"States going in for additional borrowing, as suggested by the Centre, is not viable. The Centre has a sizeable sum in the compensation kitty, and an additional sum of Rs 13,000 crore will go to this compensation fund due to revised allocation of IGST for 2017-18. All this will collectively form 45 per cent of the revenue gap. For the remaining 55 per cent, should the Centre jettison everything? It would be best if the Centre borrowed the shortfall and compensate states. More than the economics of borrowing, it sends a strong signal to all stakeholders in the Indian economy of keeping accounts transparent and upfront," he said.

During the ongoing fiscal, the total shortfall in revenue faced by Punjab till September is 18.68 per cent over the corresponding period last year. Of this, the highest shortfall has been in the GST collections (Rs 2,104.62 crore).

The only area where the state has seen an increase in tax collections is in excise (up by Rs 150 crore over last year). Though the revenues have started looking up since last month, the state is feeling the pinch on account of the Covid-induced slowdown.

The Finance Minister also reportedly questioned the GST Council Chairman as to how the Centre was proposing payment of compensation to states beyond the transition period.

from The Tribune

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