The Trinamool Congress (TMC) rejected the BJP-led Centre’s GST proposal at the 41st GST council meeting on Thursday which was done through video conferencing. Various states will now hold a discussion on Monday and come to a collective decision, before taking the Centre into confidence and saying the GST proposal is not acceptable.
The agenda of the meeting last week chaired by Union Finance Minister Nirmala Sitharaman was to discuss compensation cess which West Bengal Finance Minister Dr Amit Mitra on Sunday said that the Centre’s proposal amounts to the burden bring borne by states which will also threaten federalism.
He asked: “Huge debts are being trust on the states which will destroy the health of the states and federalism will be trust. Therefore brut power of centralism will come into play. If it is the act of God, is demonetisation an act of God? Who played God?”
Amit Mitra who went on to comment that before being an act of God there was an act of fraud.
Dr Mitra also referred to Nandan Nilekani’s presentation to the Central government depicting a revenue loss of around Rs.70,000 crore.
Dr Mitra’s statements gain importance since he had also chaired the meeting of Empowered Committee of State Finance ministers in 2017.
“I had chaired the meeting. We had said that it will be changed to the Parliament ‘shall’ decide for a period of up to 5 years. ‘Shall’. I communicated this to Arun Jaitley(the late former Union Minister) and he accepted the fact that they will change it from ‘Parliament May’ to ‘Parliament shall’ ‘in 5 Years’ to ‘Up to 5 years’. Only then did we agree to GST.” Explained Dr Mitra who also referred to Jaitley’s comments on GST while in the opposition when the Congress led UPA government was at the Centre before BJP took over the mantle in 2014.
“In 2013 Arun Jaitley had come to the FICCI annual general body meeting(AGM) and said that Congress/UPA’s proposal is not acceptable to me because BJP does not trust the Central government to give compensation to states, if revenue were not to be up to the benchmark. Today history has come a full circle,” said Dr Mitra and referred to TMC Rajya Sabha MP Derek Obrien’s comments in Parliament that the TMC supported the GST but strongly questioned them on implementation.
Dr Mitra reflected on two possible solutions but also explained why both are not feasible for states.
Option 1: Assume there is no COVID-19 that there is a revenue deficit of Rs.97,000 crore. This Dr Mitra said was not possible as the country is reeling in the COVID-19 pandemic and lockdown.
Option 2: States have to borrow, and the burden will be on states nut the states will not be able to borrow as there is no FRBM relaxation. The current FRBM limit is 1-1.5% of GDP which the states have used up. Hence the states will have to borrow which is not possible due to FRBM. In addition to this, debt servicing will be high and added to that is the interest as well. Dr. Mitra referred to this as a catch 22 situation which will ruin the economy and hence the TMC finds it unacceptable. The RBI also has reportedly asked the Centre to borrow rather than take the back door and ask states to borrow.
The question now is, how many states will join the discussion on Monday and come to a consensus to convince the Centre why the GST proposal is not acceptable to majority of states? Will BJP led states be part of the discussion or will only opposition states join hands to express similar views? Even though West Bengal did pay salaries and pensions of government employees on time, some states have failed to do so due to lack of funds in the state coffers. If this is true for majority of states reeling under the COVID-19 pandemic, then many states are likely to come together to speak in the one voice.
