Bengal finance minister Amit Mitra has urged N.K. Singh, chairman of the Fifteenth Finance Commission, to extend the tenure of the GST compensation to states by three years.
The Fifteenth Finance Commission was set up in 2017 to give recommendations for the devolution of taxes and address various fiscal issues for five years, commencing from April 1, 2020.
After the rollout of the Goods and Services Tax (GST) mechanism in 2017, it was decided that the Centre would compensate the states for the revenue shortfall on account of the shift to the new indirect tax regime for a transition period of five years and such transition period will end in 2022.
Several states, including Bengal, have expressed their concern before the GST Council over declining collections limiting their ability to implement the centrally sponsored schemes, necessitating greater compensation.
The current economic slowdown is the root cause of certain structural issues such as demonetization, early adoption of GST and liquidity crisis following the IL&FS default.
Mitra said at the 165th annual general meeting of the Bengal Chamber of Commerce and Industry that “States today have the burden of 60 percent of the development expenditure on their shoulders. What is the receipt of the state? GST collection is not increasing. So, I said to honorable N. K. Singh at GST meetings to see the divergence between what we spend and what we receive. It is my fear that in 2022, we will fall off the cliff.”
Further added “Why 2022? Today we are getting compensated by the Centre and in 2022 that stops. I made a request to please recommend in the Finance Commission to extend the period of compensation by another three years.,”
The Centre, however, is not bound to accept all the recommendations of the Finance Commission.