Depriving states of GST dues 'betrayal of trust': Mamata

Kolkata: Chief Minister Mamata Banerjee on Wednesday wrote to Prime Minister Narendra Modi that depriving states of GST compensation is an "attempt to undermine federalism" and urged him not to belie the trust between the states and the Centre on the issue.

Attorney General K K Venugopal's opinion that it is not the responsibility of the Centre to compensate the states for Goods and Services Tax (GST) shortfall during a pandemic "appears to be an act of subterfuge", Banerjee said in the letter.

In the 41st meeting of GST Council on August 27, Union Finance minister Nirmala Sitharaman said that the COVID-19 pandemic is an "act of God" which has hit GST collection and ruled out paying compensation to states from its coffers.

"On behalf of Bengal and other states, I sincerely urge you not to belie the trust between the States and the Centre on matters of GST which has been hailed globally as the finest example of cooperative federalism," Banerjee said.

She asked Modi not to allow "an insufferable blow to the federalist polity of the nation" by depriving the states of the GST compensation.

"I am deeply anguished by the Goods and Services Tax (GST) imbroglio which tantamounts to a betrayal of the trust and moral responsibility of the Government of India towards the states, violating the very premise of federalism.

"This is a travesty and an abrogation of the fundamental basis on which the states gave up 70 per cent of their taxing powers, including the entire VAT regime, to usher in the GST regime," Banerjee said in the four-page letter.

The "agreed formula" for giving up taxing powers was the promise of full compensation of shortfall in GST collection for five years, she said adding that the Centre is duty-bound to give compensation to the states.

She reminded Modi that as the Chief Minister of Gujarat, he had opposed the implementation of GST and the late BJP leader Arun Jaitley had stated that the saffron party did not trust the Centre in honouring compensation of GST losses to the states.

"His words are ringing in our ears as we are losing trust on the BJP Government in the Centre, in honouring its solemn promise of fully compensating GST losses to the states," Banerjee added.

As per the Centre's calculations, the compensation requirement of states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore would come from levy of cess.

Out of the shortfall of Rs 2.35 lakh crore, the shortfall due to GST implementation is Rs 97,000 crore and the remaining is due to COVID-19 impact.

The Chief Minister said despite assurances, states are being thrust with "two unilateral options, both of which require the States to borrow lakhs and crores of rupees".

Instead of helping the states, the Centre has stopped assistance to them and is thrusting more financial burden on them, she said.

Meanwhile, echoing the sentiments, Kerala Chief Minister Pinarayi Vijayan wrote to the Prime Minister requesting him to advise the Finance Ministry not to go ahead with the plans of transferring the burden of GST compensation on the states.

"It is felt that transferring the obligation of GST compensation to the States through their borrowing is not in accordance with the spirit of understanding reached between the Centre & the States during the discussions preceding the constitutional amendment for bringing in GST," Vijayan wrote in a letter to Modi.