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Centre releases over Rs 35,000 crore relief to states ahead of GST meet

The payment was pending since August, drawing protests from states, particularly non-BJP ruled ones

Kanishka Gupta  |  New Delhi 

On Monday, December 16, just two days before the crucial (Goods and Service Tax) Council Meeting, the central government released over Rs 35,000 crore of the pending compensation to the states and union territories. This is likely to give a positive signal to states for the upcoming meeting, where the opposition-ruled states had planned to raise the issue of delayed payments again.

But why ?

Well, according to the separate Compensation Act, if states’ revenue does not grow by at least 14 per cent over the base year of 2015-16, which happened this year, the Centre pays it the difference, after every two months.

So, on Monday, facing heat over delay in payment of GST compensation, Union assured states that the Centre would not “renege” on the promise of and released Rs 35, 298 crore for the months of August and September.

The payment was pending since August, drawing protests from states, particularly non-BJP ruled ones.

According to a media report, finance ministers of Kerala, West Bengal, Delhi, Rajasthan and Punjab had even released a joint statement, last month, stating that the delay was putting ‘acute pressure’ on their fiscal situation.

Before of the release of compensation to states came, West Bengal Amit Mitra also wrote to Sitharaman, raising the issue of non-payment of these dues.

He reminded her about his earlier letter of November in which he had impressed upon her the context in which the constitutional guarantee was given to the states.

Well, after the release of payment, Bihar Deputy Chief Minister Sushil Modi told Business Standard, “Compensation has been released to the states for the months of August and September. We are hopeful that compensation for October and November will be released by the end of the month.”

Besides, earlier, Parliament’s Standing Committee on Finance had said the Centre had paid Rs 45,745 crore as compensation to states for the first four months of the current financial year. The dues were paid in June and August.

However, according to Sitharaman’s statement in the Rajya Sabha, the Centre had released compensation of Rs 65,250 crore, which means Rs 9,783 crore more than what the Centre collected through the compensation cess — Rs 55,467 crore as of October 31 this year.

What’s next?

In the upcoming GST Council meeting...

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First Published: Tue, December 17 2019. 13:26 IST