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States should reject GST compensation options, demand money in one voice, says Chidambaram

Senior Congress leader and former finance minister, Chidambaram said the 2 options given by the Modi govt to states to bridge the GST compensation gap is a gross violation of law.

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New Delhi: Senior Congress leader P Chidambaram on Friday urged states to reject options given to them by the Centre over the GST compensation issue and demand money in one voice.

His remarks come a day after the government asked states to borrow more to make up for revenue losses due to pending GST dues.

“States must reject both options and demand, in one voice, that the Centre must find the resources and provide the money to the States,” Chidambaram tweeted.

“The two options given by the Modi government to the States to bridge the GST Compensation gap is a gross violation of the law and an abdication of the responsibility of the central government,” he said.

He claimed that in either option, the central government is passing the buck of financial burden to the states.

Under the law, the obligation to compensate the states falls solely on the central government, the senior Congress leader noted.

“The latest assault on the States is part of an elaborate design of the Modi government to financially cripple the States and reduce them to beg for money from the Centre,” Chidambaram claimed.

Amid a chorus by non-NDA ruled states for compensation of GST revenue shortfall, the Centre on Thursday during the GST Council meeting told states that the estimated deficit of Rs 2.35 lakh crore this fiscal year can be made good by borrowing from the market against future tax revenues.

At the end of a five-hour long meeting of the GST Council, Union Finance Minister Nirmala Sitharaman said there was no proposal to raise tax rates to make up for the shortfall that has been compounded by the COVID-19 pandemic hitting economic activity.

Citing a legal opinion from the attorney general, she ruled out the Centre making good the shortfall from either its coffers or by borrowing on its balance sheet.

The Centre also made a distinction between revenue lost due to implementation of the GST and the economic slowdown arising out of the COVID-19 crisis.

The government said its legal obligation was only to compensate states for losses arising out of the GST rollout.

Also read: Rs 3 lakh cr GST shortfall to states, Sitharaman says act of God may see economy contracting


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  1. If Jaitley had been there he would have found a work around compromise, in his typical style. Mme Sitharaman is temperamentally incapable of that.

    One way could be for Center and States to share the burden and borrowing from RBI be at 50: 50 levels.
    Why can’t the GST Council discuss such compromise fomulas ? The Centre cannot just give a suggestion and walk away. SItharaman seems to have done just that.. Tomorrow, the States may in desperation start levying local taxes and to hell with the laws.

  2. I have not been able to fathom the importance given by press to Shri Chidambaram, currently out on bail. It was under his active activity and guidance that Indian economy became one of the Fragile Five.

  3. You idio.
    In these Covid times, when GOI has not been able to collect sufficient GST, because of lockdown and international business scenario, how could center give GST, to the tune of previous years??
    Disgusting .

  4. This is a very problematic situation. Just because all states come together and ask for money doesn’t magically create money. The covid and also the preceeding slow down has hit revenues. What did the states do to make economic growth a priority? And this man and this party should be last to talk about states begging for money. An unelected planning commission created by an executive order made CMs feel like beggers because that body became more powerful in devolving money than the Finance Commission. Let’s all sit and find a solution.

  5. It would be better to offer solutions – indiscriminate borrowing for unneeded expenditure seems terrible economics. Wouldn’t it be better to have each state do a detailed re-budgeting in light of the COVID crisis and work out gap funding? Measures like cost control – PPP should be used more to … maybe?

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