KCR was playing the vote bank politics!

Goods and Service Tax (GST) compensation by central government to the states has become a major issue. With economy slow downing than expected, due to extended lockdowns there has been no revenue to the government. This led to the centre asked states to meet the shortfall in GST compensation through borrowings. This has led to unified voice against Prime Minister Narendra Modi and his government's decision.



As part of this, six non-Bharatiya Janata Party (BJP) ruled states including Telangana have vociferously condemned the decision and have asked the central government to borrow money and distribute to the states. As if this is not enough, Telangana Chief Minister K Chandrasekhar Rao has taken on Modi by writing a letter. And it is being said the letter had political annotations! It is being said with Greater Hyderabad Municipal Corporation (GHMC) elections due early next year, KCR was trying to impress upon Muslim voters in GHMC area that he was not a supporter of BJP and its ways.



In the letter, the CM took strong exception to the unilateral decisions taken by GST council on the payment of dues and compensation to the states in the crisis time. KCR said that the centre has violated the provisions of GST compensation act by parking the surpluses in the compensation fund in its consolidated fund instead of parking them in the non lapsable compensation fund in the Public Account. He strongly opposed to the centre suggestion to the states to go for borrowings to meet the financial requirements.

He said that states are in the forefront of fighting Covid and reviving the stalled state economies. States needed more financial resources than the centre in the crisis time. "The Centre is abdicating its responsibility of fully compensating states by taking recourse to legal opinion," he said.

The CM said, "While the states' revenue collections have significantly declined, their expenditure commitments have increased. In April 2020, we suffered a revenue loss of 83%, whereas Covid-19 pandemic related expenditure has increased. We are faced with the difficult task of meeting the expenditure through front loading of market borrowings, taking resort to ways and means advances and overdrafts. With broad fiscal policy being controlled by the central government, states are made to depend on the centre even to go for market borrowings."




"It is also a matter of grave concern to states that the centre has taken an unilateral decision to apply 10 per cent growth to arrive at the gap in GST revenue for 2020-21. Further, an artificial distinction is being made between the loss of revenue on account of GST implementation and the impact of Covid-19. Such a distinction is not provided for in the GST Act. Thus, statutory provisions for GST compensation have no meaning, if the centre does not honour them in letter and spirit," KCR observed.

Never had KCR written such strongly worded letter to the PM on all the policy decisions that were taken by the centre. Keeping this aspect in mind, political analysts say that KCR was playing the vote bank politics!