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The Rs 97,000 crore twist in #GST Compensation Cess Case
The constitutional amendment states that compensation shall be provided to the States
"...for loss of revenue on account of implementation of the goods and services tax..."
The centre has interpreted this narrowly...
The constitutional amendment states that compensation shall be provided to the States
"...for loss of revenue on account of implementation of the goods and services tax..."
The centre has interpreted this narrowly...
The centre estimates Rs 3 lakh crore payable to the states as compensation this fiscal.
Due to low tax revenue collection it expects to face a compensation cess shortfall of Rs 2.35 lakh crore.
Due to low tax revenue collection it expects to face a compensation cess shortfall of Rs 2.35 lakh crore.
But it attributes most of this to Covid and claims the loss due "implementation of GST" (see constitutional amendment in first tweet) is only Rs 97,000 crore.
It computed this based on previous shortfall data.
It computed this based on previous shortfall data.
Not that it's giving states either Rs 97,000 crore or Rs 2.35 lakh crore.
It offered 2 options. But 1 choice.
Dear states, please go borrow. https://www.bloombergquint.com/gst/compensation-cess-shortfall-centre-presents-two-options-to-states
It offered 2 options. But 1 choice.
Dear states, please go borrow. https://www.bloombergquint.com/gst/compensation-cess-shortfall-centre-presents-two-options-to-states
This centre approach raises 3 issues.
1. That it's reneging on its word.
"In principle and the form of the commitment which was made was that of compensation (revenue), not borrowing."
- @Subhashgarg1960 https://www.bloombergquint.com/gst/making-states-borrow-is-against-spirit-of-gst-pact-ex-finance-secretary-subhash-chandra-garg
1. That it's reneging on its word.
"In principle and the form of the commitment which was made was that of compensation (revenue), not borrowing."
- @Subhashgarg1960 https://www.bloombergquint.com/gst/making-states-borrow-is-against-spirit-of-gst-pact-ex-finance-secretary-subhash-chandra-garg
2. It kills any chance of any near term GST clean up.
Because levy of compensation cess will now extend beyond 2022.
The hope of fewer and lower rates...pushed further back.
Because levy of compensation cess will now extend beyond 2022.
The hope of fewer and lower rates...pushed further back.
3. The states will now be forced to borrow.
How will that impact their expenditure decisions?
Will it push them to reform, divest state PSUs, find new sources of revenue?
Or will citizens suffer?
How will that impact their expenditure decisions?
Will it push them to reform, divest state PSUs, find new sources of revenue?
Or will citizens suffer?
And yes, there's the question of whose debt this will be counted as... https://www.bloombergquint.com/gst/three-economic-questions-raised-by-governments-gst-compensation-plan
"It is the travesty of times that the sovereign is behaving like an insurance company invoking an “Act of God” to renege from its obligation to compensate states for a revenue shortfall."
By @HaseebDrabu
#mustread
https://www.bloombergquint.com/gst/gst-compensation-defer-centres-outgo-dont-deny-states-their-due
By @HaseebDrabu
#mustread
https://www.bloombergquint.com/gst/gst-compensation-defer-centres-outgo-dont-deny-states-their-due
