Prime Minister’s Office asks finance ministry to explain the GST payout mess

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Taking a grim view of the GST compensation issue snowballing into a major controversy with even BJP-ruled states expressing concerns over non-payment by the Centre, the Prime Minister’s Office (PMO) has sought an explanation from the finance ministry, sources said.

Confirming the development, a senior finance ministry official told TNIE, “There is a lot of confusion and misinformation going on.” According to sources, the PMO sought to know from the finance ministry the current financial situation in terms of revenue collection and what the ministry is doing to boost GST collection.

It also wanted to know in the event of a shortfall, what options the government is going to propose in the GST Council. The confusion began last month when the revenue secretary told a Parliamentary panel meeting that the Centre may not be able to pay states in the near future. Sources said the PMO was not very happy with this response.

More recently, Attorney General K K Venugopal’s reportedly gave his legal opinion that the Centre has no obligation to pay the GST compensation shortfall to states and that it is up to the GST Council to find ways to make good the shortfall in the compensation fund.

The AG’s comments triggered outrage among not only Opposition-ruled states such as Kerala, Punjab, West Bengal but also BJP-ruled Gujarat, Haryana and Bihar. Kerala Finance Minister Thomas Issac threatened to move the Supreme Court if the Centre goes back on disbursing GST compensation.

Sources said the PMO decided to step in after Bihar Deputy CM Sushil Kumar Modi requested PM Narendra Modi to intervene. Under the GST law, states are guaranteed to be compensated bimonthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017.

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