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In his letter, Chandrashekhar Rao pointed out that the States were in the forefront of fighting the COVID-19 pandemic and reviving the State economies, and thus, in need of more resources than the Centre.
Hyderabad: Chief Minister K Chandrashekhar Rao did not pull any punches in his missive to Prime Minister Narendra Modi on Tuesday seeking full GST compensation and other dues to States, arguing that it was the States that were in the forefront of fighting the Covid-19 pandemic and hence, were more in need of increased resources than the Centre. Taking a strong exception to the Centre’s decision to reduce GST compensation and dues pending to States, the Chief Minister sought Modi’s intervention to address the concerns raised by the States. He urged the Prime Minister to strengthen cooperative federalism during this crisis situation and ensure that the country not only overcomes it but also emerges as a stronger nation.
The Chief Minister’s letter comes in the wake of reduction in GST compensation payable to States from about Rs 3 lakh crore to Rs 1.65 lakh crore. He had already written to Union Finance Minister Nirmala Sitharaman expressing the State’s opposition to the Centre’s move on Monday. In his letter to the Prime Minister Chandrashekhar Rao pointed out that States were in the process of reviving their economies and were in need of more resources than the Centre. “Telangana State suffered a revenue loss of 83 per cent in April this year while the pandemic-related expenditure increased. We are faced with the difficult task of meeting the expenditure through market borrowings, resorting to ways and means advances and overdrafts. With the broad fiscal policy being controlled by the Union government, the States are depending on it even to go for market borrowings,” he said.
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Expressing concern over the modalities for meeting the shortfall in GST compensation payable by the Centre, he said the Centre took a unilateral decision to apply 10 per cent growth to arrive at the gap in GST revenue for the current fiscal. He observed that artificial distinction was being made between loss of revenue on account of GST implementation and the impact of Covid which was not provided in the Act. “Statutory provisions for GST compensation has no meaning if the Centre does not honour it in letter and spirit,” he added.
He also found no merit in the argument that additional borrowings by the Centre influences yields on the Central government securities and has other macro-economic repercussions. He felt that borrowings either by the Centre or the States and their impact on macro-economic situation were no different. Chandrashekhar Rao stated that GST subsumed over 47 per cent of the gross tax revenue of States when compared to only 31 per cent loss of the Centre. He pointed out that the States had no major buoyant taxes of their own, while the Centre was still left with sources such as income tax, corporate tax and customs duties among others, besides having access to non-tax revenues such as dividends from the Reserve Bank of India, Central Public Sector Undertakings, and others.
