Boosting GST Debt In States Will Lead To ‘Raw Power Of Centralism’: Bengal Finance Minister
At the 41st GST council meeting on August 27, the Union Finance Minister Nirmala Sitharaman said that the Covid-19 pandemic is an “act of God” that affected the collection of GST and ruled out the payment of compensations to the states with their coffers.
In the name of the “act of God,” a huge debt is being imposed on the states that will destroy their financial health and federalism will be crushed giving rise to the “raw power of centralism,” Mitra said.
“We find it totally unacceptable,” Mitra said at a virtual press conference.
He claimed that 15 large states, including some ruled by the BJP, opposed Sitharaman’s suggestion and said the Center should borrow.
Mitra said that GST Network founder Nandan Nilekani previously made a statement to the GST Board that the total loss of revenue due to fraudulent transactions is Rs 70 billion.
“So is this an act of God or an act of fraud?” asked the Finance Minister of West Bengal.
Mitra said that Sitharaman on March 14 before Covid had said that the Center is obliged to compensate states.
“Now they are saying the opposite. This is a total subterfuge,” he added.
According to him, if states borrow, returns will suffer.
“Why doesn’t the Center borrow directly? The Center can monetize debt by printing money that states cannot,” he said.
Mitra said RBI had even said that the Center can borrow directly from the main bank window.
According to the Center’s calculations, the states’ compensation requirement in the current tax status would be Rs 3 lakh crore, of which Rs 65,000 crore would come from tax collection.
Out of the deficit of Rs 2.35 lakh crore, the deficit due to the implementation of GST is Rs 97,000 crore and the remainder is due to the impact of Covid-19.
The Center has given states two options: borrow the entire Rs 2.35 lakh crore or borrow just Rs 97,000 crore through a special window, which would be provided by the RBI, to cover the revenue shortfall.
Mitra said that the Fiscal Responsibility and Budget Management (FRBM) limit has not been relaxed, and therefore, unlike the Center, states have no room to borrow.
He said West Bengal already had a revenue shortfall of 15 billion rupees and exhausted the FRBM cap.
“We hope to have a collective decision on this matter very soon and seek more clarity from the Center,” Mitra said.