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Ashok Gehlot Seeks Centre’s Intervention Over GST Compensation To States

By Rhea Banerjee      Sep 09, 2020      0 Comments      1,656 Views

Ashok Gehlot, Chief Minister of Rajasthan recently on 7th September, Monday had urged the Centre on to fulfill the commitments that were made to the state government while applying the GST provisions and leave it to the state governments the right to some taxes levied by the Centre. 

The Rajasthan CM has asked Prime Minister, Narendra Modi to intervene in this matter and transfer the right to taxes to the states, “to maintain assurance in the financial relations between Centre and State.” Gehlot has written a letter to the Prime Minister here he drew the attention on the key issues faced by the states while making the payment of GST compensation, as mentioned by an official. As per the letter, it was mentioned that under the Constitution amendment many state taxes were included in GST and it was informed that the states would be getting compensation insight of this revenue loss. 

He further said that as per the GST (Compensation to State) Act 2017, it assures that states should be provided with compensation for the upcoming 5 years to meet the revenue loss that has been incurred due to the execution of the Goods and Service Tax. Thus, it is the responsibility of the Centre to ensure that the states are receiving full compensation for the same under the mentioned act. 

The Rajasthan CM has claimed that even though the tax collection must have been reduced due to the unavoidable circumstances, but this cannot be a reason to reduce the compensation under this Act. The same has been notified in the GST Act too, that the central government has no authority to increase or decrease the compensation provided. Citing the meetings held before in the GST Council, Gehlot mentioned that multiple decisions were taken in these meetings, which included 100% compensation to states for revenue loss for a period of 5 years (2017-22), the Centre was liable to pay the amount to States and in event of any shortage take loans and pay the compensation. 

He has also stated that GST is based on collective decisions that involved both the Centre and the State governments. He described the complex issues that were arising regarding the payment of stated compensation to the Prime Minister through this letter and in place of the predetermined 14% increase in the final year of Central Government’s compensation, the idea of zero percent increase is neither fair nor justified on the part of States. 

The letter also mentioned that it is the responsibility of the Centre to manage its economy as well as its funds because when the tax collection will get higher in the future the central government will be the only one availing its benefits. Hence, the letter has requested that the Centre and Prime Minister should take some steps regarding the payment of compensation and take responsibility for the GST collection too. 

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