Punjab cannot borrow money for shortfall in GST compensation: Manpreet Badal

Ruchika M Khanna
Tribune News Service
Chandigarh, October 5

Punjab told the GST Council on Monday that it cannot borrow money, as suggested by the Government of India, for the shortfall in GST compensation to the states.

In case of the Centre’s failure to release this compensation, the state will have to adopt “all other legal options at its disposal for dispute resolution with the Centre”. 

We want our full compensation for GST, as was promised to the state before the GST roll out, Punjab Finance Minister Manpreet Singh Badal, reportedly told the Council today.

The state has not received any compensation this fiscal, though half the financial year has passed by. A sum of Rs 9,000 crore is due to the state (for April-September).

Talking to The Tribune after the GST Council meeting ended late in the evening, Manpreet Singh Badal said since there was no headway in the deadlock between some states, including Punjab and the Centre, his advice to Punjab Chief minister Capt Amarinder Singh and his other Cabinet colleagues, would be to explore other legal options, in case Punjab did not get its full GST compensation now and its demand for setting up a GST Resolution Mechanism, is not accepted by the Centre. 

“Punjab has lost 25 per cent of its revenue base because of the lockdown and subsequent economic downturn. It is unfair not to compensate the state in these hard times,” he said.

“States going in for additional borrowing, as suggested by the Centre, is not viable. The Centre has a sizeable sum in the compensation kitty, and an additional sum of Rs 13,000 crore will go additionally in this Compensation Fund due to revised allocation of IGST for 2017-18. All this will collectively form 45 per cent of the revenue gap. For the remaining 55 per cent, should the Centre jettison everything? It would be best if the Centre borrowed the shortfall and compensate states. More than the economics of borrowing, it sends a strong signal to all stake holders in Indian economy of keeping accounts transparent and upfront,” he said.

It may be mentioned that during the ongoing financial year, the total shortfall in revenue faced by Punjab till September, is 18.68 per cent, over the corresponding period last year. Of this, the highest shortfall has been in the GST collections (Rs 2104.62 crore). 

The only area where the state has seen an increase in tax collections is in excise (up by Rs 150 crore over last year). Though the revenues have started looking up since the last month, the state is feeling the pinch on account of the COVID-induced economic slowdown.

Finance Minister Badal reportedly also questioned the chairman of the GST Council about how the Centre was proposing payment of compensation to states, beyond the transition period.

“We have got legal advice from the Attorney General, saying that no provision exists in the Compensation Act for extending the period of five years for payment of compensation to states. It is only in the case that all states agree to shift part of the compensation outside the transition period that this can be done. Will the Centre go against the advice of the AG? It is legally binding on the Centre to pay the compensation, and we will do all within our means to get this compensation for Punjab,” he said.