"West Bengal accuses federal government of withholding GST compensation for states; Sitharaman dismisses allegations"
In a recent televised interview, Amit Mitra, Principal Chief Adviser to Chief Minister Mamata Banerjee, expressed concerns about the impact of the new GST reforms, stating that the impact could be "far greater than officially acknowledged." Mitra's remarks come as the GST Council, chaired by Finance Minister Nirmala Sitharaman, continues to discuss the future of the tax reform.
Sitharaman has defended the GST, dismissing West Bengal's claim that states have been denied compensation for revenue losses under the Goods and Services Tax (GST). She emphasized that discussions in the GST Council are open and extensive, and that the concerns of the twelve states regarding compensation for revenue losses are being addressed through continuous dialogue.
Mitra, however, alleged that the voices of eleven states seeking compensation are being muffled in the GST Council. He argued that states grappling with revenue shortfalls frequently look to the Centre for support to meet their spending obligations. Mitra warned that the new GST reforms could seriously weaken states' finances, affecting spending on health, education, and women's welfare.
One of the key points of contention is the extension of the compensation cess, a temporary measure conceived to guarantee states' revenue for the first five years after GST's rollout. Levied over and above the 28 per cent GST on luxury and demerit goods, the cess has been a crucial source of revenue for many states. However, Sitharaman made clear that extending the compensation cess is legally untenable.
Sitharaman's priority, she stated, is to put money into people's hands, stimulating demand and thereby generating higher tax collections. She defended the nil GST, arguing that without it, the cost would ultimately fall on consumers. Sitharaman recalled earlier criticisms of GST, mentioning the term "Gabbar Singh Tax," and emphasized that the new reforms are necessary to make the tax system more efficient and fair.
Mitra criticized the absence of the anti-profiteering authority in the GST Council, set up to ensure tax reductions are passed on to consumers. He stated that the impact of the new GST reforms could be "far greater than officially acknowledged," raising doubts over whether ordinary people will benefit from the reforms.
Despite these disagreements, Sitharaman clarified that the decision to end deliberations earlier than planned was taken collectively by Council members, not dictated by her office. She also highlighted that many insurance portfolios still have opportunities for insurers to avail input tax credit.
In conclusion, the future of the GST reforms and the compensation for states remains a contentious issue. As the GST Council continues its discussions, it is crucial that all voices are heard and the interests of both the Centre and the states are balanced to ensure the success of the tax reforms.
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