States flag concern over pending GST compensation, urge Centre to clear dues immediately

States said they are already facing financial crunch, especially revenues are hit hard due to COVID-19 impact on businesses, and clearance of dues at this time will ease their financial requirements to meet their expenses, sources privy to the developments told CNBC-TV18.

Talking to CNBC-TV18, Nitin Patel, deputy chief minister and finance minister of Gujarat said, "Centre is aware of our dues. The central government has a due of about Rs 11,000-12,000 crore. This includes GST compensation due of about Rs 7,000-8,000 crore. The businesses in Gujarat, like any other parts of the country are not functioning."

"Lockdown due to COVID-19 has lead to about 90 percent decline in economic activity of the state leading to a similar impact on states revenues. Gujarat is able to manage it's expenses and the relief package cost. we are independently also tying up resources to meet our requirements, but Centre is well aware of our position and we expect the central government will soon release the dues," Patel added.

West Bengal finance minister Amit Mitra has written to union finance minister Nirmala Sitharaman saying, "The spread of COVID-19 pandemic has created havoc to the state finances. Business activities have been hit badly, severely impacting the revenues of the atate. You would appreciate that under these circumstances, non-receipt of GST compensation from the central government has further aggravated the already stretched state finances."

"The state of West Bengal is yet to receive GST compensation to the extent of Rs 1,775 crore up to January 2020, which includes the outstanding compensation for October-November 2019. Moreover, GST compensation for February —March 2020 of approximately Rs 1,100 crore has also become due. Therefore, the total amount due to the state of West Bengal for GST compensation amounts to Rs 2,875 crore. I therefore, urge you to immediately release the entire outstanding GST compensation due to the state," Mitra's letter said.

Meanwhile, union finance ministry later in the evening released Rs 17,287 crore to different states to enhance their financial resources. The funds released includes Rs 6,195 crore on account of revenue deficit grant under the 15th Finance Commission recommendations to as many as 14 states. Remaining Rs 11,093 crore is to all states as advance payment of central share of first installment of State Disaster Response Mitigation Fund (SDRMF).

Union finance minister Nirmala Sitharaman in a tweet added, "These States are Andhra Pradesh, Assam, Himachal Pradesh, Kerala, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim, Tamil Nadu, Tripura, Uttarakhand & West Bengal. The remaining Rs 11,092 crore is to all States as advance payment of Central share of 1st instalment of SDRMF."

Union home ministry in a press statement said, "Following the assurance given yesterday by Prime Minister Narendra Modi during his video conference meeting with the Chief Ministers, Union Minister for Home Affairs, Shri Amit Shah has approved the release of Rs 11,092 crore under the State Disaster Risk Management Fund (SDRMF), to all States."

"With a view to make available additional funds to the State Governments for taking preventive and mitigation measures for containment of COVID-19, Central Government on 14.03.2020 has already made a special dispensation for utilization of State Disaster Response Fund (SDRF). This Fund was allowed to be utilized for setting up quarantine facilities, sample collection and screening; setting up additional testing laboratories, cost of consumables; purchase of personal protection equipments for healthcare, municipal, police and fire authorities; purchase of thermal scanners, ventilators, air purifiers, and consumables for Government hospitals," home ministry statement added.

In the GST Council meeting held on March 14, , union finance minister and chairman of the council had assured states of early disbursement of pending compensation dues. The Centre in the council agenda of March 14 meeting had said it owes Rs 48,000 crore to states as GST compensation.

Centre also wanted the council to together find out measures to enhance the revenue collections which will help government meet these compensation fund requirements.

The union government says it owes Rs 14,036 crore as GST compensation for October-November 2019 and another Rs 33,946 crore for December 2019-January 20, which has become a fresh due in February.

Till now, Centre has paid full GST compensation for April-September 2019 and has made part payments for October-November 2019. The current average revenue gap across India has increased from 14 percent in FY19 to 23 percent in FY20 and currently only five states have a revenue surplus in FY20, these include Arunachal Pradesh, Mizoram, Manipur, Nagaland and Sikkim.

"Problem now is that even these five states are likely to slip in to revenue deficit due to the economic impact of COVID-19 and the lockdown. This implying that from March onwards, Centre might need to pay more as compensation dues," government sources added.

According to government sources familiar with the development said, "The rise in revenue gap has led to a surge in funds needed to pay the states compensation. Also, the average month on month growth of revenues has fallen from 16 percent in March 2019 to 8 percent in February 2020. This is also likely to go down further."