CM P. Vijayan writes to Finance Min regarding GST compensation

There has been turmoil in Kerala regarding GST compensation. Kerala Chief Minister Pinarayi Vijayan has addressed to Union Finance Minister Nirmala Sitharaman asking for the borrowable amount to bridge Goods and Services Tax (GST) revenue shortfall to be improved to Rs 1.83 lakh crore instead of the recommended Rs 1.10 lakh crore. He also urged her to hold further discussion with finance ministers of states for the same.

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While he welcomed the decision of the Union government to borrow Rs 1.10 lakh crore using the Special Window Facility and then lend to states as back-to-back loans, the CM pointed out that the delay in payment of compensation has put additional stress on the already fragile fiscal situation in the states. He writes, “The present uncertainties are the result of not following the letter and spirit of the GST (Compensation to States) Act 2017. We appreciate the fact that you have recognised the right of the States to get compensation."

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"Given this, what needs to be resolved now is the quantum of compensation to be paid and the manner in which it is to be disbursed,” he added. He said that out of the total due of Rs 2.35 lakh crore, states should have already got, in the normal course, Rs 1.83 lakh crore. Moreover, he said that the additional 0.5% borrowing limit without conditions cannot be treated as a facility being given to states in place of the unpaid part of the compensation, as the principal and the interest of the borrowing has to be repaid by the states.

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