Describing the denial of Goods and Services Tax (GST) compensation to the States as an “insufferable blow to federalist policy of our nation,” Chief Minister Mamata Banerjee on Wednesday wrote a letter to Prime Minister Narendra Modi urging him “not to belie the trust between the States and Centre on matters of GST”.
“When the consensus was arrived at between all the Finance Ministers of the country and the Centre that Parliament shall compensate the State for five years, there was no legalist approach taken by bring in AG (Attorney General), since it was a matter of full cooperation between the Centre and the States,” Ms. Banerjee said in the letter.
Objecting to the Centre taking legal opinions on the issue through the AG, the Bengal CM said that engaging the AG, which she had learnt from media reports, who seemed to have opined that it is not the responsibility of the government of India to compensate the States for GST shortfall, it “appears to be act of subterfuge to undermine the trust reposed by the States in the spirit of cooperative federalism”.
Ms. Banerjee suggested that Centre must borrow to meet the shortfall at this critical hour of the COVID-19 pandemic and said that she is sure that “States will reciprocate with a cess collection that continues beyond the five years so that the entire debt of the Centre is totally liquidated”.
Ms. Banerjee’s letter comes after West Bengal Finance Minister Amit Mitra said that the denial of GST compensation is a strategic attack on the finances of the States and that it will bring down federalism.
Echoing similar sentiments like Mr. Mitra, Ms. Banerjee said that despite assurances, States were being thrust with two “unilateral options, both of which require the States to borrow lakhs and crores of rupees, when many of them are unable to pay salaries to their employees…”
In the communication, the Chief Minister also reminded the Prime Minister that as the Chief Minister of Gujarat, Mr. Modi had opposed implementation of GST on various grounds and late finance minister Arun Jaitley had said that the BJP was opposing GST as it did not trust the government of India to honour its solemn promise of fully compensating GST loses to States.
