As the finance ministry takes suggestions from states on how to augment revenue collections, especially on current cess rate revision, on Wednesday, a delegation of six state finance ministers and representatives met union minister Nirmala Sitharaman seeking early disbursal of the pending compensation dues.
Six states -- Kerala, Rajasthan, Punjab, Madhya Pradesh, Chhattisgarh, and Delhi, after meeting Sitharaman, said that the states are embarrassed to come and beg for their dues, which they were promised under the constitution.
"We had an open discussion with the FM about compensation of August and September for states. The question also includes compensation for next two months that is October and November. We are facing issues to clear dues. We can't close the jails, schools, and hospitals. We need to pay pensions, salaries. States have a lot many responsibilities," Manpreet Singh Badal, Punjab finance minister said.
"We can't come to Delhi every day. We don't feel good and we feel embarrassed. At times, those who ask for money are not taken seriously. The government of India is under obligation to pay to the states," he added.
Badal also updated that Sitharaman assured them of a speedy release of funds but did not give a timeline.
"The FM has assured that funds would be released as soon as possible but she could not give a timeline and neither could she share the reason of this delay,” Badal said.
Manish Sisodia, the deputy chief minister of Delhi, who also holds the charge of the capital's finances said, “Centre has close to Rs 50,000 crore in the compensation kitty. In the last GST Council meeting on September 20 in Goa, the council was told that the cess kitty has an opening balance of Rs 23-24000 crore and again close to the same amount has come after the recent collections. We do not know where this money has gone and why the centre is saying they do not have funds."
The central government owes Delhi Rs 3,600 crore according to Sisodia.
Not just these two states, Rajasthan government representative, Subhash Garg said, “Centre has deliberately made us stand with a begging bowl in front of them, that too for our rightful due. Centre owes us Rs 4000 crore.”
Similarly, Madhya Pradesh government representative Brajendra Singh Rathore said, “Centre has due of Rs 3000 crore to our state. We have asked the union finance minister to share the reason and also clear the dues at the earliest. We will raise this issue in the upcoming GST Council meeting on December 18.” Meanwhile, finance minister Nirmala Sitharaman said that the central government would look into the demands presented by the aggrieved states.
“Some state finance ministers met me and requested that GST compensation due to them should be released. They have given me a memorandum. I will definitely look into it. We are all duty-bound to follow the Act. I do not have details readily available with me as to how much GST compensation amount is due to the states," she said.
Meanwhile, speaking exclusively CNBC-TV18, revenue secretary, Ajay Bhushan Prasad Pandey, on Tuesday said, “When it comes to other measures to augment revenue collections, my department has recently written to all SGST commissioners, across states and UTs on November 27 asking them to give their suggestions/inputs/proposals as regards measures on compliance as well as rates which will help in augmenting revenue to be submitted by them to the centre by December 6."
These suggestions shall then be placed before the committee of officers for urgent examination.
Pandey further explained, "In the communication we have asked them (states) to make specific suggestions on review of items currently under exemption, GST and compensation cess rates for various items, and rate calibration for addressing the inverted duty structure. This discussion is quite critical as lower GST and compensation cess collections have been a matter of concern in the last few months.The revenue secretary also said that the compensation requirements have increased significantly and are unlikely to be met from the compensation cess being collected.
As per the Section 7 of the GST (Compensation to States) Act, 2017, the compensation payable to a state for loss of revenue shall be provisionally calculated and released at the end of every two months.
The agreement between the centre and states, at the time of the GST rollout was that the Centre will compensate states to ensure that their revenue is protected at the level of 14 percent over the base year tax collection, that is the revenues of 2015-16.Minister of state for finance, Anurag Thakur, has said, "The Centre will ensure that the rights of states in terms of compensation under the Goods and Services Tax are protected."