Centre not reneging on its promise to compensate states for any GST revenue loss: FM

Finance minister Nirmala Sitharaman said the Centre is not reneging on its promise to compensate states for any revenue loss due to the transition to the goods and services tax regime and had “gone much beyond” to protect them.

She said the Centre’s transfer to the states, including grants and tax transfers, exceeded its total revenue collection, which had plummeted by over 29 per cent, and it was managing its own spending via borrowings.

“Centre is not reneging… The GST Council will take a call on how the gap (deficit in the compensation cess fund) will be met… It will take a call on the borrowing,” Sitharaman said while winding up the discussion on the first supplementary demand for grants.

The Lok Sabha later passed the supplementary demand, which allows the government additional spending of Rs 1.67 lakh crore, by voice vote on Friday.

Sitharaman said compensation to states is given from the cess collection and there is no provision to provide it from the Consolidated Fund of India.

“Attorney General opinion on this issue has come… We are in discussions with the states on the options that have been given to them… Solution will come in the Council,” she said.

The Centre has offered two borrowing options to the states to meet the revenue loss – Rs 97,000 crore due to GST transition and Rs 2.35 lakh crore due to GST and the Covid-19-induced slowdown.

She chided the opposition, which had targeted her for calling Covid-19 an act of God, when internationally most had invoked force majeure.

Sitharaman said the government had taken measures to ensure money goes into the hands of people.

From the net outgo, the government planned to infuse Rs 40,000 crore into the rural employment guarantee scheme MGNREGA, according to announcements made in the Atma Nirbhar Bharat package.

Further Rs 31,000 crore for direct benefit transfer to rural women, Rs 16,000 crore for price stabilisation fund and food subsidy and Rs 46,602 crore as deficit grant to states have also been included.