The Center has for the first time acknowledged that it has no money to pay the state governments their share of the GST revenues since the grand launch of the GST regime three years ago in 2017.
Union Finance Secretary Ajay Bhushan Pandey apparently told a parliamentary panel that "the central government is in no position to pay the share of the states" under the revenue share formula.
The slowdown in the economy before the coronavirus breakout had also led to lesser GST collections. Since August 2019, GST collection has dipped to almost half of what is due to states.
Members of the Opposition parties are now up in arms over Pandey's statement.
The first meeting of the Parliamentary committee saw Opposition members criticizing the government over non-release of the states' share. The members pointed out that GST mandates that Centre must compensate states for shortfall in reaching 14 per cent revenue growth target, calculated on FY16 revenue base from taxes subsumed in GST. They said that states have incurred huge losses in the fight against coronavirus and the resultant migrant crisis.
A panel member said, "The central government was in a rush to push the implementation of GST law. The resource crunch is highlighting that the law was hastily drawn and shoddily implemented. The deficiencies are being exposed by the economic crisis triggered by the pandemic and the Centre is as always clueless on how to resolve the situation."
The Finance Secretary, sources said, retorted that the GST Act was built with provisions to rework the formula for compensation to states if the revenue collection dropped below a certain level. He added that the issue is under discussion in the GST Council.
Meanwhile, a Ministry of Finance released on Monday had said that the central government released Rs 13,806 crore of GST compensation pertaining to FY 2019-20. It added that with this amount, the entire compensation up to 2019-20 has been released to states.