Maharashtra Deputy Chief Minister Ajit Pawar, who holds the planning and finance departments, has made a fresh appeal to Finance Minister Nirmala Sitharaman to protect the states’ revenue as per the present arrangement at 14% increment every year. Pawar, who could not attend the 46th GST Council meeting, in his letter to Sitharaman said this is necessitated as the Centre has not extended the revenue protection to states beyond June 30, 2022.
‘’For the past two years, the states have been passing through the COVID 19 crisis and its adverse effects on trade and industry have reduced revenues of all states. In such a scenario, if the deadline for compensation from the Centre for GST deficit is not extended beyond June 30, 2022, the states will face a serious financial crisis. Therefore, the deadline for GST compensation should be extended beyond June 30, 2022, with an annual increase of 14 per cent,’’ Pawar said in a letter to Sitharaman.
He argued that in view of the COVID-19 situation the economy could not perform up to the expectations. Further, if revenue protection is not extended, it will adversely affect the state finances. ‘’Hence, Maharashtra proposes for extension of compensation for the period of five years beyond June 30, 2022, under GST Compensation Act and the revenue of the states be protected as per present agreement at 14% increment every year,’’ he added.
Pawar has put the ball in the Centre’s court demanding the early clearance of GST compensation arrears of Rs 31,624 crore to the state government. ‘’The Maha Vikas Aghadi government has successfully dealt with a number of natural disasters, including the Corona Crisis which has posed serious financial challenges. Despite that the development works are underway and the government has also maintained the pace of infrastructure development in particular. The financial discipline has not been allowed to deteriorate. This is also despite the Centre having to clear GST compensation dues of Rs 31,624 crore,’’ he noted.
Meanwhile, Pawar had also urged Sitharaman to defer the increase in GST rates to 12% from 5% on textile-related products which were to be effective from January 1, 2022. ‘’At this juncture, an increase in the tax rate of textile goods may affect the common public further. In view of this, Maharashtra is of the opinion that the decision to increase tax rates on textile goods may be deferred and after proper review, further decisions may be taken,’’ said Pawar.
The GST Council at its meeting has decided to put on hold and increase in GST rates on textile goods. Sitharaman announced that the issue has been referred to a rate rationalization committee that would look at textiles in their review and submit the report by February.
