Chhattisgarh CM writes to PM Modi requesting GST Compensation for Next 10 years

On Thursday, Chhattisgarh Chief Minister Bhupesh Baghel urged Prime Minister Narendra Modi to extend the current compensation grant scheme of the Goods and Services Tax (GST) for another ten years. Baghel also stated in a letter to PM Modi on Thursday that the Central Government should develop an alternate permanent mechanism for revenue compensation to the producing states as soon as possible.

The Chief Minister stated that the discontinuation of the GST compensation grant is a huge economic loss for producing states like Chhattisgarh, adding, “As a manufacturing state, our contribution to the development of the country’s economy is much greater than that of those states that have benefited in the GST tax system due to higher consumption of goods and services.”

He stated that if the GST compensation is not extended beyond June 2022, Chhattisgarh will suffer a revenue loss of almost Rs 5,000 crore in the ensuing fiscal year.”

Many other states may experience revenue shortfalls in the following year, as well. As a result, arranging for a shortage in money for the state’s ongoing public welfare and development operations would be challenging,” he stated.

Baghel also mentioned the pre-budget consultation meetings for Budget 2022-23, which were held in New Delhi in December 2021 and were led by the Union Finance Minister with the Chief Ministers and Finance Ministers.

According to the Chief Minister, since the establishment of the GST tax system, states’ autonomy in formulating tax policies has been severely curtailed, and there is little income-related potential in tax revenue other than commercial tax.

“Although we are making every effort to generate money,” he added, “the current compensation grant system should be sustained for the next 10 years to recover from the unfavorable impact of COVID-19 on the economies of states and until the actual benefits of the GST tax system are recognised.”

He has also urged the Central Government to devise an alternate permanent mechanism to compensate manufacturing states for revenue shortfalls.

The Chief Minister expressed optimism that the Prime Minister will concur with states’ concerns and act in the spirit of cooperative federalism to settle the critical problem impacting the interests of all states.