States say no to 15th Finance Commission’s offer of lower rate of compensation


PANAJI (GOA): State governments have turned down the 15th Finance Commission’s suggestion that they accept a lower compensation rate in lieu of any shortfall in Goods and Service Tax (GST) revenues.

The Commission has termed the current 14% growth rate as “too high”, even as states have demanded that the compensation period be extended by another three years till 2025.

“The 15th Finance Commission has suggested that annual growth rate of 14% for compensation is too high and should be lowered for the remaining compensation period….States are not in favour of this,” a senior state government official said on the sidelines of the Goods and Services Tax Council meeting here on Friday.

Another state government official also said state governments could not accept the suggestion.

The Centre had promised a compounded annual growth rate of 14% over 2016-17 revenues for any shortfall. The Commission is concerned about the compensation rate after the central government’s own revenue has come under pressure with the economy facing a slowdown. India’s GDP growth rate slipped to a six-year low of 5% in first quarter of the ongoing fiscal year.

Finance Commission chairman NK Singh made a detailed presentation before the Goods and Services Tax Council. The Council also discussed two notes circulated by the Commission on revenue projections and tax rates.

Assam finance minister Himanta Biswa Sarma said states favoured stability in GST rates.

“Till the finance commission submits its report, not many changes should be expected on GST rates, structure from the GST Council,” Sarma said.