Bihar govt seeks GST compensation extension for another five years

The Bihar government on Wednesday urged the Centre to consider extending for another five years the GST compensation awarded to states, which was discontinued last year.

State Finance Minister Vijay Kumar Chaudhary flagged it as one of the expectations from the upcoming Union budget.

"Several other concerns were also raised by me at Union Finance Minister Nirmala Sitharaman's pre-budget meeting with state representatives. One of these was, of course, the long-standing demand for special category status to Bihar," Chaudhary told PTI in an interview.

"Another thorny issue has been the increasing load on the states with regard to centrally sponsored schemes. Earlier, the Centre used to bear 90 per cent of the total expenditure," he said.

The ratio has "changed" and, now, states are required to "bear 50 per cent of the financial burden", Chaudhary claimed.

"This is not proper. After all, the Centre claims all credit for such schemes", said the JD(U) leader, whose party snapped ties with the ruling BJP at the Centre less than six months ago.

Chaudhary also spoke about the need for granting relief to states by restoring GST compensation which was introduced after the new tax regime came into force.

"I think the GST compensation should continue for at least five years. The Centre should give it a serious thought," he said.

Notably, when a nationwide Goods and Services Tax subsumed 17 central and state levies from July 1, 2017, it was decided that states would be compensated for any loss of revenue from the new indirect tax regime for five years. That timeframe had ended on June 30 last year.

GST Council, in its 42nd meeting, had recommended extending the period of levy of GST compensation cess beyond June 2022 to cover the entire shortfall as well as servicing the back-to-back loan released to states to meet their resource gap.