Several states demanded that the goods and services tax (GST) compensation be extended beyond the five-year period ending in June 2022, citing financial strains caused by the pandemic.
During a pre-budget meeting with Finance Minister Nirmala Sitharaman, they also demanded that the federal government take on a larger share of centrally sponsored schemes, higher borrowing limits, and capital expenditure assistance.
Rajasthan, Tamil Nadu, Chhattisgarh, Kerala, West Bengal, and Delhi all supported the demand for a compensation period extension.
The State of the Economy is at Risk
The compensation cess was requested to be extended until 2026-27 by Rajasthan and West Bengal. Kerala requested an extension of five years. "A pandemic crisis was not anticipated when this was fixed," said Chandrima Bhattacharya, West Bengal's urban development and municipal affairs minister.
For a period of five years, the Centre promised to compensate states for any revenue loss caused by the transition to GST, which began on July 1, 2017. For this reason, a compensation cess on luxury and depreciating goods was enacted.
Instead of slashing central excise duty, Baghel requested that the Centre reduce the cess it levies on gasoline and diesel. Some states also expressed concern about rising inflation and sought tax cuts.
Increased borrowings
States demanded a higher borrowing limit for the next fiscal year, as well as support for capital expenditures. States had requested an increase in the Union government's share of Centre-sponsored schemes, according to Bhattacharya. In terms of state borrowing, she believes that new borrowing windows should be open without restrictions.
P Thiagarajan, the finance minister of Tamil Nadu, agreed that the Centre's share of schemes should be increased. He also wants the Centre to allow the state to borrow up to 5% of its gross domestic product (GSDP) without any restrictions in FY23.