Non-payment of GST dues by Centre put states in a spot

Setting GST for drugs – an essential item – at a standard five per cent, with a zero per cent rate for life-saving drugs, it said will reduce costs for patients and support government’s efforts to improve access to affordable.

Ahead of the crucial Goods and Services Tax (GST) meet on Wednesday (December 18), all non-BJP states warned the Centre that it may knock at the doors of the Supreme Court if their dues aren’t cleared. States like Kerala, West Bengal, Punjab, Delhi and Chhattisgarh, Madhya Pradesh, Rajasthan and Union Territory of Puducherry have hardened their stand over the Centre’s position that it may not be able to give the full share of the GST compensation due to them. States are yet to receive compensation for the months of August and September.

The Centre is, however, in a spot as Central GST collection has fallen short of the budget estimate by nearly 40% during the April-November period of 2019-20. This was revealed by the data presented in the Parliament by minister of state for finance Anurag Singh Thakur on Monday.

The actual CGST collection during April-November stood at Rs 3,28,365 crore while the budgeted estimate is of Rs 5,26,000 crore for these months. Thakur added that the data was, however, provisional. In 2018-19, the actual CGST collection stood at Rs 4,57,534 crore as against the provisional estimate of Rs 6,03,900 crore for the year.

Also read: Central GST falls short of budget estimate by 40% in April-November quarter

In the same reply the minister also informed the house that it has inserted a new CGST rule which puts restriction that the input tax credit availed by a taxpayer shall not exceed 20% of the eligible credit available in respect of invoices or debit notes.

“The capping of input tax credit would lead to reduction in cases of fraudulent ITC availment as well as increase in payment of tax through cash thereby boosting GST collection,” Thakur said

Ahead of the GST council meet next week, the Centre has been urging states to agree to new, higher GST rates in the lowest slab (5% to 6%) and merging of two rates (18% and 12% into a new 15% slab), the states in turn will seek timely payment of compensation by the Centre for lower GST revenues realised by states, and is also likely to raise the issue of GST anomalies that have seriously hurt the states.

Finance Ministers of Delhi, Punjab, Puducherry and Madhya Pradesh and representatives of Kerala, Rajasthan, Chhattisgarh and West Bengal met Union Finance Minister Nirmala Sitharaman last week on this issue.

Also read: After 3-month gap, GST collection crosses ₹1 lakh crore in November

The GST council meeting scheduled to be held next week in the face of these issues is likely to be a crucial one.

DMK’s T R Baalu said finance ministers of several states have met the Union finance minister demanding their “rightful share” in the GST. The dues to states have to be released every two month but it has not been done, he said, claiming that Tamil Nadu, where his party is the main opposition, is suffering from “severe cash crunch” after falling in the debt trap of over Rs 3.79 lakh crore.

Nama Nageswara Rao of the TRS said the Centre owed a total of Rs 29,891 crore to Telangana under various funds, including Rs 4,531 crore in GST. Shiv Sena’s Vinayak Raut said the Centre had to give Rs 15,558 crore to Maharashtra. He said chief minister Uddhav Thackeray had written to the Centre but the Union government is not taking the matter seriously, he said.

Some state governments have raised concerns regarding compensation on the GST. The states had pegged the pending dues at around Rs 50,000 crore. In this regard, representatives from various states held a meeting with Finance Minister Nirmala Sitharaman earlier this month.

When the GST was introduced from July 1, 2017, the Centre had assured the states through a legislation that the revenue shortfall arising from their taxes being subsumed in the new indirect tax will be compensated fully for the first five years.

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