The central government will keep its "compact" to give state their share of the goods and services tax (GST) though the cess collected has been inadequate, said Finance Minister Nirmala Sitharaman on Saturday.
Sitharaman's statement comes after Kerala last week threatened to take the central government to Supreme Court over delay in the payment of compensation to states. The finance ministers of Punjab, Kerala, Delhi, Rajasthan, Chhattisgarh, and Madhya Pradesh had met Sitharaman on December 4 and urged that funds due for four months since August be released as soon as possible.
“In the last GST collection, the cess fund wasn’t adequate (and) so the states didn’t get the 14 per cent compensation. When we collect the required cess, we will honour the compensation rate,” said Sitharaman at the Hindustan Times Leadership Summit in New Delhi.
It’s not that the compact (with states) has been broken. The compact will be honoured,” she said.
Cess collections under the GST to compensate states for revenue loss have fallen short of requirements in the current fiscal year on account of slowdown in demand. Under the law, if the states’ GST revenue does not grow by at least 14 per cent, the Centre pays them the difference after every two months.
The August and September compensation dues for Rajasthan are Rs 4,400 crore, for Punjab it is Rs 2,100 crore, for Delhi it is Rs 2,355 crore, for Kerala it is Rs 1,600 crore, and for West Bengal it is Rs 1,500 crore.