Hyderabad: Telangana Chief Minister K. Chandrashekhar Rao wrote a letter to Prime Minister Narendra Modi on Monday regarding the shortfall in GST compensation to the state after the Centre denied paying it to the states.
He wrote that the Government of Telangana fully supported the introduction of GST knowing very well that it would result in a loss of revenue in short term, keeping in view the national interest and in expectation of long term gains and more investments following the introduction of GST.
“The then UPA government assured the states on payment of full compensation arising out of the abolition of CST. However, the states were denied CST compensation and Telangana state was deprived of Rs 3,800 crore on account of revenue loss by CST. Due to this bitter experience, on the insistence of states, it was clearly stipulated in the GST Compensation Act, that full compensation for the loss of revenue on account of implementation of GST shall be paid that to on a bi-monthly basis. Despite such a statutory mandate, there have been long delays in the payment of compensation and the states have not been paid GST compensation since April, 2020,” said the CM.
He also said that the revenue of the state collections have significantly declined and that their expenditure commitments have increased. In April, 2020, Telangana suffered 83 per cent of revenue loss because of Covid-19 pandemic and its related expenditure has increased.
“We are faced with the difficult task of meeting the expenditure through front-loading of market borrowings, taking resort to ways and means of advances and overdrafts,” said the CM
He also added that the broad fiscal policy was controlled by the Government of India and that states are made to depend on the Union government even to go for market borrowings.
He also added that it is a matter of grave concern to states that the Centre has taken a unilateral decision to apply 10 per cent growth to arrive at the gap in GST revenue for the year 2020-21. “Further, an artificial distinction is being made between the loss of revenue on account of GST implementation and the impact of Covid. Such a distinction is not provided for in the Act,” said the CM.
He also said that the states had yielded more fiscal space to facilitate the introduction of GST. He added that states are at the forefront of fighting Covid and reviving the stalled economic activities and that they need resources from the Centre.