Extend period of GST compensation by 3 more years: Congress


Udaipur: The compensation period to states for any loss of revenue under the Goods and Services Tax regime, which ends in June, must be extended by another three years, given the challenging economic situation and poor financial health of the states, the Congress party demanded on Saturday.

India must also “reset” its economic policies, 31 years after the government ushered in economic reforms, to take into account “global and domestic developments” as well as “social inequalities” and tweak the policies “for the next 10-20-30 years,” it said. The party will push the policy changes as a part of its 2024 manifesto.

Addressing the media at the Congress’s Chintan Shivir (brainstorming workshop), former finance minister P Chidambaram demanded an extension of the compensation period and announced that the party would “strongly disapprove” any attempt of the government to prevent the GST Council from seeking such an extension.

The GST law allowed a five-year period for compensating states of any loss in tax revenues after the implementation of the Goods and Services Tax in July 2017. The compensation window ends in June.

Thirty one years after he accompanied Manmohan Singh, then finance minister, in ushering liberalization through economic reforms in 1991, Chidambaram, who was then commerce minister, now pitched for another “reset” in economic policies.

“We believe that we must prepare the Indian economy and the Indian workforce to adapt to the ways in which industry, business and trade will be conducted in the 21st century, with the greater use of automation, robotics, machine learning and artificial intelligence,” he said. “We believe that important changes in economic policies will be required in the light of climate change and the need for mitigation and adaptation.”

Recalling his first experience in policymaking in 1991, Chidambaram said, “We are now 30 years down the road. The world is changed, India is changed. A reset means taking into account global and domestic development and fine tuning the policies that have obviously given us benefits, but clearly a time for reset has come.”

“While we acknowledge that we have reaped enormous benefits as a result of liberalization, we have to take into account global and domestic developments, and reset our policies for the next 10-20-30 years,” he added.

He described the current state of economy as “a matter of extreme concern”, slammed the Reserve Bank of India for falling “behind the curve” in tackling inflation and said: “Inflation has risen to unacceptable level. The WPI (Wholesale Price Index) is at 14.55% and the CPI (Consumer Price Index) is at 7.9%. There are high taxes on petrol and diesel and high GST tax rates. The job situation has never been so low, with 40.38% job participation rate and unemployment rate at 7.83%.”

The time is ripe for a comprehensive review of Centre-state fiscal relations, the veteran Congress leader said. “The consequences of the poorly drafted and unfairly implemented GST laws brought in by the Modi government in 2017 are there for every one to see,” he said. “The states’ fiscal position is fragile as never before and needs urgent remedial measures.”

He rejected the government’s plea that high inflation rates are a result of the Ukraine war as “lame excuse” and argued that “high inflationary trend was noticed in pre-Ukraine. The Ukraine war has added to our problem.”

While unpaid GST compensation has remained a tricky issue between the state and the Centre, Chidambaram claimed there is a “complete breakdown of trust” between the central Government and the states, including some states ruled by the Bharatiya Janata Party.



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