The GST Council has moved away from a “consensus-based approach” to an “authoritarian” one, the West Bengal Finance Minister, Amit Mitra charged on Monday.

He also demanded that the Centre clear the additional goods and services tax (GST) compensation cess shortfall of ₹63,000 crore to States for FY21. West Bengal is eyeing an additional compensation of approximately ₹5,000 crore.

According to Mitra, dissenting voices were being overlooked in the GST Council meetings and a “majority opinion was being thrust”. This was not the idea when the Council was set up.

“The GST Council is a federal institution that has been working on a consensus-based approach. At least this was supposed to be the practice when State governments were asked to give up their taxation powers and move towards an unified taxation system. But, now it (GST Council) is an ubiquitous, omnipotent, authoritarian and majoritarian council,” Mitra alleged.

Issues like zero taxation on Covid-care related items have been overlooked despite at least “eight-nine finance ministers” speaking in favour of it. Revenue loss, because of GST waiver on items like masks, sanitisers, PPE kits, oxygen concentrators, electrical furnaces, among others, would me “miniscule”. Letters written to the Union Finance Minister have also elicited no response, he said.

“I heard eight to nine other finance ministers present at the last GST Council meeting (carried out through video conferencing) wanted zero tax on Covid-care related items. We even suggested a token tax rate of 0.01 per cent, if legalities were an issue,” Mitra claimed, adding that unilateral decision-making was taking place and this undermined the importance of the Council.

The Bengal FM, who has been critical of the GST Council’s functioning in recent times, did not specify on possible recourse he and other Opposition-ruled State finance minister want. “We are currently reaching out to the people. I need to talk to other State finance ministers regarding the possible alternatives,” he added.

Compensation shortfall

Mitra also raised the issue of delay in release of GST compensation cess. According to him, the revenue growth projections for FY21 were pegged at 7 per cent by the Centre; but in real terms, revenues saw a “negative growth” of three per cent. The additional compensation burden, under the changed equation, now works out to be ₹63,000 core.

“The notional revenue projection and actual revenue growth were different. So there is a GST compensation shortfall of ₹63,000 crore which needs to be paid to States. Bengal’s due is ₹5,000 crore and we need this fund to carry out development work, infra development and so on, especially during Covid times,” he said.

In March, the Centre released ₹30,000 crore to States and Union Territories (UTs) as compensation towards GST shortfall. The total amount of compensation released in FY21 was ₹70,000 crore. The Centre also released an additional ₹14,000 crore as ad hoc settlement of integrated GST. This is apart from the back-to-back loan of nearly ₹1.10-lakh crore released in lieu of shortfall in GST compensation.

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