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Cus - Export of non-basmati rice - Notification 20/2023 insofar as it denies the benefit of the transitional arrangement as contained in para-1.05 of the FTP 2023, is bad in law: HCCus - Refund of SAD - 102/2007-Cus - Areca Nut and Supari are one and the same - Objections with regard to name, nature and status of importer or buyers or the end use of goods purchased by them etc. are extraneous: HCCX - Interest on Refund - Since wrong order annexed by petitioner in paper book, Bench is unable to proceed further - Petition is dismissed with liberty to file a fresh one: HCGST - No E-way bill - When petitioner imports machinery and after Customs clearance, transports same to his own factory, it cannot be said that such a transportation would fall within the definition of term 'supply' - Penalty imposable under second limb of s.129(1)(a): HCGST - Fix responsibility on officers who allowed BG to lapse - Petitioner not justified in not renewing BG - Cost of Rs.15 lacs imposed, to be paid to PM Cares Fund: HCGST - Since the parties agree that petition can be disposed of on the basis of records available before Appellate Authority, petitioner is directed to enclose all documents filed before Appellate Authority in a compilation, in form of a paper book: HCWrong RoadST - Whether any service is used for personal consumption or not is certainly question of fact and being question of fact, no substantial question of law arises: HCGovt proposes to amend Geographical Indication of Goods Rules; Draft issued for feedbackST - If what has been paid as tax is without authority of law, Revenue should refund the same - Denial of credit would result in the whole exercise being tax neutral: HCWarehousing Authority notifies several agri goods to be stored in only registered warehousesST - Even if the petitioner may have a case on merits, it is best left to be decided by the Appellate Authority under the hierarchy prescribed under the FA, 1994: HCUS FDA okays Eli Lilly Alzheimer’s drugGST - Petitioner challenges jurisdiction of assessing officer - Petitioner is entitled to file an appeal u/s 107 by availing an alternate efficacious remedy: HCFive from Telangana killed in car accident on Pune-Solapur HighwayGST - Existence of an alternative remedy is a material consideration but not a bar to the exercise of jurisdiction: HCHush money case against Donald Trump - Sentencing deferred to Sept 18GST - It is open to a trader to take goods by whichever route he opts, unless the law otherwise requires, destination point being intact: HCDeadly hurricane Beryl smashes properties in JamaicaGST - Conclusion that taxable person is providing a service to supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier is ex facie erroneous and contrary to the fundamental tenets of GST law: HCIsrael claims 900 militants killed in Rafah since May monthGST - Order expressly records that personal hearing notice was returned with endorsement 'no such person at address' - Since petitioner has shifted to a new premises, it is just and necessary to provide an opportunity to contest demand: HC116 die in stampede at UP ’Satsang’I-T- Application for revision of order dismissed in limine on grounds of delay; case remanded for re-consideration: HCWe are deepening economic ties with India, says US officialI-T- As per Section 119(2)(b), power to condone applications relate to claims for amount exceeding Rs 50 lakhs are to be considered by CBDT; however it is impermissible for CBDT to pass order on merits: HC8 Dutch engineers build world’s longest bicycle - 180 feet, 11 inchesI-T- Additions framed u/s 68 for unexplained income & u/s 69 for unexplained expenditure not tenable where complete transactional details are furnished & not doubted: HCRailways earns Rs 14798 Crore from Freight loading in June monthI-T- Delay in filing ITR is per se insufficient reason to estimate assessee's profit @15% on turnover, more so where audited financial report is filed in timely manner: ITATMoD inks MoU to set up testing facilities in Unmanned Aerial System in TN Defence Industrial CorridorI-T- For invoking section 69A, assessee should be found to be owner of any money, bullion, jewellery or other valuable article & which is not recorded in the books of account: ITATGovt proposes Guidelines for ethical approach to Coal MiningI-T- TDS credit can be allowed based on AIS, where details pertaining to TDS, advance tax & other payments are reflected in Form 26AS: ITATVaishnaw to inaugurate Global IndiaAI Summit 2024I-T- Lending money with the primary intention of earning interest can be considered a business activity, but nature and manner of lending, as well as the frequency, should be taken into account: ITAT
 
GST Compensation - Gift, Statute, Trust?

AUGUST 05, 2020

By Vijay Kumar

Central Sales Tax (CST) Compensation

In his Budget Speech on 29.02.2008, the then Finance Minister Mr. Chidambaram stated,

Following an agreement between the Central Government and the State Governments, the rate of Central Sales Tax was reduced from 4 per cent to 3 per cent in this financial year. It is now proposed to reduce the rate to 2 per cent from April 1, 2008. Consultations are underway on the compensation for losses, if any, and once agreement is reached the new rate will be notified.

In his budget speech on 28.02.2013, (Mr. Chidambaram was still the Finance Minister), he said,

There is need for the Centre to compensate the States for loss due to the reduction in the CST rate. Hope inspires courage.

I propose to take the first decisive step by setting apart, in the Budget, a sum of Rs. 9,000 crore towards the first instalment of the balance of CST compensation. 

Obviously, he was not very keen to compensate the States.

On 07.08.2015, the Minister of State for Finance, Jayant Sinha informed Parliament,

The Empowered Committee had recommended to pay 100% CST compensation for year 2010-11, 75% CST compensation for 2011-12 and 50% CST compensation for 2012-13. Union Cabinet in its meeting held on 17.3.2015 had approved payment of CST compensation to the States for the financial years 2010-11, 2011-12 and 2012-13 as per EC recommendation. Accordingly, Central Government (Department of Revenue) has released total Rs. 17,118.02 crore towards payment of CST compensation to the States/UT's for the year 2010-11.

CST compensation to the states/UT's for year 2011-12 is proposed to be paid in two installments in Financial Year 2015-16. CST compensation for the states for 2012-13 will be paid in 2016-17.

Provision of Rs. 15,028 crore has been made in BE 2015-16 for payment of CST compensation to the States/UT's for the year 2011-12.

Earlier on 10.12.2014, the then Finance Minister Mr. Arun Jaitley had told the Lok Sabha,

Let me Sir, with your permission, make the following statement so that it is quoted correctly: A major impediment in the implementation of the GST has been the trust deficit between the States and the Centre. One of the major reasons for this trust deficit is non-payment of the CST compensation to the States from 2010 onwards. In my meeting with the Empowered Committee of the State Finance Ministers on 3rd July, 2014, I had committed that partial payment of the outstanding CST compensation will be released this year. I stand by this commitment given by me. Despite difficult and challenging situation, I proposed to release about Rs.11,000 crore which is one-third this year as part payment of CST compensation to the States. This will take care of the amount from 2010-11 onwards; the balance amount I will start paying from the next financial year onwards when hopefully the situation would be better.

On the first anniversary of GST on 1 st July 2018, Mr Jaitley wrote

Firstly, the UPA Government lost the confidence of the States, including the Congress ruled States. In a move towards the single tax system, the UPA asked the States to abolish the CST. It promised the States that it would give them a compensation in lieu of the CST for a certain number of years. The States acted accordingly, abolished the CST and the Central Government owed the States several thousand crores as CST compensation. When the States demanded CST compensation, the Centre would look the other way. When I took over as the Finance Minister in May 2014, all the States, including the BJP ruled States, told me that they don't trust the Central Government because of what the UPA Government had done. They will discuss GST only if past CST compensation is paid. I conceded that the UPA let down of the States was unacceptable and in order to bridge the trust, despite pressures on the Central revenue, I will clear the arrears of the Central CST. I, accordingly, did that. The CST compensation was paid. The States were then willing to come to the table and move further on the GST.

Onto GST Compensation:

Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, stipulates,

18. Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years .

Accordingly, Parliament passed the Goods and Services Tax (Compensation to States) Act, 2017, by which States are to be compensated if their revenue growth is not more than 14% compared to the base year 2015-16.

A compensation Cess is levied for the purposes of providing compensation to the States for loss of revenue arising on account of implementation of the goods and services tax, for a period of five years or for such period as may be prescribed on the recommendations of the Council.

Now, the problem comes. What happens if the Central Government runs out of money to pay the compensation to the States, as is the position today. The Office of Mr. Anurag Thakur, Minister of State, Finance tweeted,

Centre Released Rs. 1,65,302 Crore as GST Compensation to States/UTs for the FY 2019-20 against cess collection of Rs. 95,444 crore.

To release compensation for 2019-20, balance of cess amount collected during 2017-18 and 2018-19 was also utilised.

Centre also transferred Rs. 33,412 cr from CFI to Compensation Fund as part of an exercise to apportion balance of IGST pertaining to 2017-18.

So, now the position is that the Central Government does not have enough money to compensate the States as the Cess did not bring in sufficient revenue. What to do? Borrow, deny, discuss - several options are being floated. It is reported that the Finance Secretary has stated that the Centre cannot pay the compensation and the Attorney General has advised that the Centre is not legally bound to pay.

Kerala Finance Minister Mr. Thomas Isaac tweeted,

According to news reports the hearing before Standing Committee on Finance, Centre has taken the stand that GST Compensation can't be paid and present arrangements be revised by Council. Such a brazen betrayal of federal trust! Convene the Council meeting immediately as promised.

AG opinion seems to be that if there is no money in Cess Fund it's is upto GST Council to make appropriate arrangements. Fine. But Centre has 1/3rd votes in Council. No decision can be taken without its concurrence. So, the question is, what is its stance? To pay or not to pay?

It is reported that Punjab Finance Minister Manpreet Singh has written to Union Finance Minister,

The recent reports in the national media that Central Government has informed the Parliamentary panel that it has neither the money nor the obligation to pay GST compensation to States has come as a complete shock to Punjab. Punjab is already operating with a deficit in excess of 45%, the highest among the general category states. With the current pace, this is likely to exceed 60% by the time period of assured compensation is over.

Gift, Statute or Trust

Now, we have a real crisis. Neither the Constitution, nor the Compensation Act, visualised a situation when the government at the Centre has no money to pay the compensation and the States can merrily enjoy an assured 14% increase in their GST kitty with or without actual collections. It is reported that the matter is to be discussed in the GST Council meeting. What is there to discuss? The Constitution and the Act require the centre to pay the compensation. To go back on the constitutional guarantee, will be a big blow to co-operative federalism.

Mr. Chidambaram did not pay the CST Compensation, which Mr. Arun Jaitley paid only to create a new compensation, which his successors are not able to pay. Mr. Jaitley said that a major impediment in the implementation of the GST has been the trust deficit between the States and the Centre. Should we wait for another impediment for the GST compensation to be paid?

From a former Chairman, CBIC .

Mr. Najib Shah was the CBIC Chairman just before GST was launched and was so, closely associated with its creation. In our recent webinar on "three Years of GST", he said that,

- the 14% that they accepted (at gun point) was a huge burden

- Introducing a cess was not a great idea.

- If the Cess collected is not sufficient, the Centre has a serious problem.

https://youtube-cutter.org/video/HY8eU21n2

Until next week


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Guarantee- What's that

Our constitution had guaranteed the erstwhile Princes and privy purse would be paid to them. But, in 1970, Mrs.Indira Gandhi abolished it for saving paltry sum of Rs.4 crores. So, there is already successful precedent for breaching the Constitutional guarantees. Now, States cannot walk out of GST! Can they?

Posted by Gururaj B N
 

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