Chhattisgarh minister T.S. Singh Deo writes to FM seeking extension of GST compensation

Chhattisgarh minister of commercial taxes T.S. Singh Deo wrote to Finance Minister Nirmala Sitharaman on Tuesday, urging the Centre to extend the GST compensation to the states for another five years.

Deo’s letter comes in the backdrop of the notification issued by the Ministry of Finance extending the levy of compensation cess for four more years till June 2026. It may, however, be noted that as per the decision in the September meeting of the GST Council, the practice of Centre compensating the states for revenue loss on account of GST rollout will end from June 2022 and the cess revenue thereof would be used to service the debt raised to compensate the states in the pandemic-hit FY21 and FY22.

Deo, who is a member of the Council but could not attend the ongoing meeting in Chandigarh on health grounds, pointed out in the letter that states need to be compensated beyond 2022 as they are still suffering great losses.

“The provision for 14% protected revenue will be ceasing from June 30, 2022. This must be continued for at least another five years because particularly mining and manufacturing states who are not consumers suffer a great loss of revenue,” Deo said in the letter to finance minister Nirmala Sitharaman.

Deo pointed out in the letter that Chhattisgarh suffered losses to the tune of ₹4,127 crore in FY22, ₹3,620 crore in FY21, ₹3,176 crore in FY20, and ₹2,786 crore in FY19.

“If we are to function as an effective federal unit of India, it will be impossible to invest capital in development, employment and investment in the social sector with such losses of revenue that are not compensated. We are presenting the proposal in GST Council to continue with the 14% protected revenue provision. If the protective revenue provision is not continued then the 50% formula for CGST and SGST should be changed to SGST (70-80%) and CGST (20-30%).

“The letter and spirit of the Constitution clearly lays out the federal structure of our country. Without strong and independent financial resources for all the states governments, the federal structure would become meaningless,” Deo added in the letter.