After the meeting of GST Council on Thursday, the Opposition Congress accused the Centre of behaving like colonial rulers for not releasing GST compensation to the States.

Puducherry Chief Minister V Narayanasamy and Finance Ministers of Punjab and Chhattisgarh Manpreet Singh Badal and TS Singh Deo said the Centre was not sympathetic to their demands and the Opposition-ruled States will take a collective decision on the two proposals made by the Centre within a week.

The Congress leaders said they favoured the Centre borrowing for the States, but the two proposals made by the Centre did not have this option. Narayanasamy said the Union Finance Minister had proposed that States be allowed to borrow from a special window of the RBI with a lower interest rate and for the ₹2.3-lakh-crore gap between the total compensation of about ₹3-lakh crore and cess of ₹70,000 crore, the GST Council can authorise borrowing by the States with the facilitation provided by the Centre; the interest accruing from that will also form part of the compensation cess.

“Some States agreed to the second option. Kerala Finance Minister wanted seven days’ time. With that the discussion concluded. The Finance Minister said we will meet again soon to decide on the compensation for four months,” Narayanasamy said.

‘Not acceptable’

Badal questioned the Centre’s decision not to circulate the Attorney General’s view on the compensation to the Council members. He said the Centre read out the advice, which was not acceptable to the Opposition States.

“A solution has been thrust on us. The Centre will facilitate borrowing. The future of the States will be bleak as their revenues will come down. We are not happy at this outcome. We do not have any option before us,” Badal said and demanded a redress mechanism based on the Constitution, and it also be activated so that States can take legal recourse. He said the amount in IGST worth ₹54,000 crore has been added to the Consolidated Fund by the Centre.

“The Narendra Modi Government is playing with the economy of the country. By 2022, the compensation for every State will be more than 30 per cent,” Badal added. He said GST put hurdles in the growth of Punjab. He said the ₹6-lakh-crore collected as cess on various products was not given to the States.

Deo said if there is no economic freedom for the States, federalism will be without any meaning. “States lost their economic and financial rights. This is not good for the country. The distribution of revenues should be done effectively. Producing States faced losses due to GST and consumer States benefited. The compensation offered to producing States was not given,” he said, and added that the Centre is behaving like the British rulers. Deo said the Narendra Modi Government is using the majority it has in Parliament to disregard the provisions of the Constitution and the Centre is consolidating the revenues. “We will be forced not to provide the Centre’s share if our rights are denied,” he said.

Own tax pattern

Narayanasamy added that if the States are not given their dues, they may have to take their own pattern of taxes. He said it is the primary responsibility of the Centre to ensure that States are compensated for their losses. “We are hard-pressed for revenues. The expenditure is increasing. The revenue is not coming forth. There is an FRBM cap. The Centre is not fulfilling its promises. We gave the taxing power to the Centre hoping that they will honour the commitment. We have to save our people. We know how to raise resources. We have given up our right to tax and you have become the big boss. Now, we will have to go with a begging bowl to you. There is no level playing field between producing and consuming States,” he said.

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