Mahua Moitra’s hard-hitting speech initiates dialogue on Centre’s violation of GST Compensation to states

TMC leader, Mahua Moitra had recently delivered a sizzling speech in the parliament which drew the majority’s attention to the centre’s blatant violation of their GST Compensation Cess Act. She accused the Modi government of “Robbing” the  States of their GST Share.

While referring to the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 she said that they eliminate the statutory promises made under GST and hence, weaken the rights and resources available to the states. She further stated that the PM cares fund “corners” public funds and works in the disadvantage of states.

Recently, the Comptroller and Auditor General of India revealed that the Centre had violated its law on the Goods and Services Tax regime and retained Rs 47,272 crore of the GST compensation cess. This amount was to be allocated to the states as the compensation against loss of revenue, during the financial year of 2017-’18 and 2018-’19.

The auditor additionally states that the overstatement of revenue receipts and understatement of fiscal deficit for the year occurred because the Centre had utilized the money for other purposes.

The GST (Compensation to States) Act was introduced as a relief for states in case of loss of revenue arising out of the implementation of GST. However, CAG informed that instead of transferring the entire GST cess amount to the GST compensation fund, the Centre retained these funds in the Consolidated Fund of India, and used it for “other purposes”.

Last month West Bengal Finance Minister Amit Mitra had written a letter to Nirmala Sitharaman on how states should not be asked to borrow from the market to make good the shortfall in GST revenue collection. In response, Sithraman during a GST Council meeting had stated that the coronavirus pandemic had hit the Goods and Services Tax (GST) collection with the shortfall is Rs 2.35 lakh crore. “This year we are facing an extraordinary situation that even below 10 per cent approximate estimation you are facing an ‘Act of God’ which might even result in a contraction of the economy,” she had said in the meeting.

According to latest updates the CAG has advised the finance ministry to take corrective action against its violations. β€œIt is recommended that the Ministry of Finance take immediate corrective action,” the report read.

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