Extend GST compensation for another five years: States
New Delhi: Many states have demanded that the GST compensation cess regime be extended for another five years and the share of the Union government in the centrally-sponsored schemes be raised as the COVID-19 pandemic has impacted their revenues.
The GST compensation to states for revenue shortfall resulting from subsuming of local taxes such as VAT in the uniform national tax Goods and Services Tax (GST) will end in June next year.
There has been a loss of revenue to the states due to the GST tax system, the Centre has not made arrangements to compensate the loss of revenue of about Rs 5,000 crore to the state in the coming year, so the GST compensation grant should be continued for the next five years after June 2022, Chhattisgarh Chief Minister Bhupesh Baghel said.
"Many states have asked for this. We have also asked to extend GST compensation. If it is not extended, the finances of many states will be in a bad shape," Delhi Deputy Chief Minister Manish Sisodia said after pre-Budget consultation of finance ministers of states with Union Finance Minister Nirmala Sitharaman here.
Pointing out that Chhattisgarh has received less share of central taxes by Rs 13,089 crore in the Union Budget of the last three years, Baghel demanded the share of central taxes should be given to the state completely in the coming year.
He also demanded that Rs 4,140 crore deposited with the Centre at the rate of Rs 294 per tonne on coal mining from coal block companies should be transferred to Chhattisgarh soon.
Rajasthan Education Minister Subhash Garg said extension of compensation cess window till 2026-27 is a valid demand of states and the Centre should consider it. He also demanded reduction in import duty on gold and silver from 10 per cent to 4 per cent.
"Our most significant demand is that the Centre's share in centrally-sponsored scheme has gradually reduced and states share has increased. Earlier share would be 90-10 and now it is 50-50 or 60-40, our request is that it should go back to 90-10," Garg said.
Rajasthan also requested that all irrigation and water work projects should be brought under the Centre's ambit and declared central schemes.
West Bengal also pitched for extension of GST compensation for another five years citing two years of difficult time due to COVID-19.
COVID crisis was not anticipated when this was fixed, said West Bengal Urban Development & Municipal Affairs Minister Chandrima Bhattacharya.
She also said that states have also asked for raising the Union government's share in the Centre-sponsored schemes.
With regarding to state borrowing, she said that additional borrowing window should be without any restriction.
Tamil Nadu Finance Minister P Thiaga Rajan said he has demanded extension of GST compensation cess regime for at least two years because of COVID-19. He also made a case for raising share of Government of India in the centrally-sponsored schemes.
Moreover, ahead of the GST Council meeting, several states on Thursday flagged higher tax rate on textile products from January 1 and demanded that the rate hike be put on hold.
In the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman, states like Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu said that they are not in favour of a hike in Goods and Services Tax (GST) rate on textiles to 12 per cent, from 5 per cent currently, with effect from January 1, 2022.
The 46th meeting of the GST Council, chaired by Sitharaman and comprising state FMs, is scheduled on December 31, with a single agenda to consider Gujarat's demand of putting the rate hike "decision on hold", as also representations received from trade in this regard.
Delhi Deputy Chief Minister Manish Sisodia said the move to raise GST on textiles from 5 per cent to 12 per cent is not people friendly and this should be withdrawn. If a common man buy clothes of Rs 1,000, he has to pay GST of Rs 120. "Delhi is not in favour of this," said Sisodia, who is also the Delhi Finance Minister.
Tamil Nadu Finance Minister P Thiaga Rajan said, "It is one point agenda (for tomorrow's Council meet). It is an agenda that many states have raised. In the agenda item it says that it was raised by Gujarat but I know that many states raised it. .. It should be stalled (move to raise GST rate on textile)".
Rajasthan Education Minister Subhash Garg said the Friday's GST Council meeting is likely to be on rate hike on footwear and textiles and Rajasthan does believe that rate hike on textiles should be rolled back especially when countries like Bangladesh are giving us stiff competition in such sector.
