States Demand Extension of GST Compensation for 5 Years During Pre-Budget Meeting

Many states have demanded that the GST compensation cess regime be extended for another five years and the share of the Union government in the centrally-sponsored schemes be raised as the COVID-19 pandemic has impacted their revenues.

The GST compensation to States for revenue shortfall resulting from subsuming of local taxes such as VAT in the uniform national tax Goods and Services Tax (GST) will end in June next year.

“There has been a loss of revenue to the States due to the GST tax system, the Centre has not made arrangements to compensate the loss of revenue of about INR 5,000 crore to the State in the coming year, so the GST compensation grant should be continued for the next five years after June 2022,” Chhattisgarh Chief Minister Bhupesh Baghel said.

“Many states have asked for this. We have also asked to extend GST compensation. If it is not extended, the finances of many states will be in a bad shape,” Delhi Deputy Chief Minister Manish Sisodia said after a Pre-Budget Consultation of finance ministers of states with Union Finance Minister Nirmala Sitharaman in New Delhi.

Pointing out that Chhattisgarh has received less share of central taxes by INR 13,089 crore in the Union Budget of the last three years, Mr. Baghel demanded the share of central taxes should be given to the state completely in the coming year.

Pointing out that Chhattisgarh has received less share of central taxes by INR 13,089 crore in the Union Budget of the last three years, Mr. Baghel demanded the share of central taxes should be given to the state completely in the coming year as reported by The Hindu.

Rajasthan Education Minister Subhash Garg said extension of compensation cess window till 2026-27 is a valid demand of states and the Centre should consider it.

He also demanded a reduction in import duty on gold and silver from 10% to 4%.

“Our most significant demand is that the Centre’s share in centrally-sponsored schemes has gradually reduced and the state's share has increased. Earlier share would be 90-10 and now it is 50-50 or 60-40, our request is that it should go back to 90-10,” Minister Garg said.

Rajasthan also requested that all irrigation and water work projects should be brought under the Centre’s ambit and declared central schemes.

West Bengal also pitched for extension of GST compensation for another five years citing two years of difficult time due to COVID-19.

With regard to State borrowing, she said that additional borrowing windows should be without any restriction.

Tamil Nadu Finance Minister P Thiaga Rajan said he has demanded extension of GST compensation cess regime for at least two years because of COVID-19.