CM V Narayanasamy
CM V Narayanasamy

In an exclusive interview with Free Press Journal, Puducherry Chief Minister V Narayanasamy, who represented the Union Territory at the GST Council meeting as he also holds the finance portfolio, argues that the central government cannot evade from its responsibility but provide compensation as decided unanimously in the past. He signals that states may explore legal action as a last resort against the central government.

What is your comment on the two options offered by the Centre for GST relief?

At the GST Council meeting, when the Finance Minister Nirmala Sitharaman gave both the options, we had our own reservations on that. It is the statutory commitment of the Government of India to compensate the states when there is a shortfall in the compensation cess. We had detailed deliberations. Former Finance Minister Arun Jaitely had made it clear that GoI will borrow and then they will pay to the states and the compensation cess could be collected in the sixth year or subsequent year to adjust the payment. There will be no liability on the part of the state governments to borrow. This was echoed by most of the states, including Karnataka, Maharashtra, West Bengal, Kerala, Punjab and myself. Other states, including BJP-ruled states, also agreed. Therefore, there was no consensus arrived at. FM said she will send both the proposals and states can give their views in writing.

What are your main objections?

It is unfortunate that the Centre was not helping the revenue-starved states by honouring its commitment to pay them GST compensation at 14 per cent. I discussed with our ministers, who are of the view that it is the statutory liability on the part of the Government of India to compensate the states when there is a revenue loss. Therefore, the Government of India cannot pass it onto the state governments. FRBM and fiscal deficit targets apply to the Centre and to the states also. Therefore, we said very clearly that the Government of India should do it and we will wait for its response. The FM said she will call the states again after a week. We will discuss with the FM and arrive at a solution.

What are other options available with states?

The Government of India will have to take a call. The Centre should quickly activate the disputes resolution mechanism in the GST Council as provided for in Article 279 of the Constitution. It has not yet been constituted. There is a Supreme Court option also. States will collectively decide the future course of action.

What is the amicable solution that you expect?

During the present COVID-19 crisis, the Government of India should come to the rescue of the states, instead they are putting the burden on the states.

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