Hyderabad: Telangana State has been short-changed by the Centre when it comes to devolution of IGST funds, Finance Minister T Harish Rao said on Tuesday.
The Centre owes Telangana more than what it says it does in terms of IGST devolution and it should give the State its rightful share of tax dues, Harish Rao said, in a strongly-worded letter to Union Finance Minister Nirmala Sitharaman. As against its total share of Rs 4,464 crore, Telangana only received Rs 1,652 crore and is entitled to the balance amount of Rs 2,812 crore.
Harish Rao stated that taking the actual position into consideration, including observations of Comptroller and Auditor General (CAG) and recommendations of the Finance Commission, Telangana’s share of IGST comes to a total of Rs 4,464 crore. Out of balance of Rs 1,76,688 crore, only Rs 67,998 crore was distributed to the States based on devolution formula. As a result, Telangana received Rs 1,652 crore as its share in tax devolution which is 2.437 per cent, he said.
“As observed by the CAG in their report for 2017-18, owing to the huge unsettled balances in the IGST, the GST Council at its meeting on January 25, 2018, recommended advance settlement of Rs 35,000 crore to the Centre and the States on provisional basis based on the revenue from taxes of the State in 2015-16 subsumed under the GST. This was proposed to be adjusted in 10 equal installments against the regular settlement due in 2018-19,” he said.
The Finance Minister pointed out that as per CAG, the States’ share in IGST is 50 per cent which works out to Rs 88,344 crore, but not Rs 67,998 crore as distributed by the Centre. Based on procedure used for ad hoc settlement where Telangana’s share is 4.03 per cent, the State is entitled to receive Rs 3,560 crore. “Even on the basis of devolution formula (2.437 per cent), the State’s share works out to Rs 2,153 crore,” he observed.
Harish Rao, in the letter, pointed out that the CAG had observed that devolution of IGST was in contravention of the provisions of the Constitution as Article 270 (1) excludes duties levied under Article 269 A (1) from list of taxes and duties to be distributed between the Union and States. “When the Ministry sent the accounting procedure for IGST to CAG for approval, the procedure for advance apportionment of IGST to the Centre and States, as recommended by the GST Council was agreed to by the CAG. But the procedure for devolution was not agreed to by the CAG stating that devolution of IGST was against the provisions of the Constitution,” he pointed out.
The procedure followed by the Centre, apart from being unconstitutional, had deprived the States of their due share in IGST and had adversely their revenues, he said.
Further, Harish Rao pointed out that as per recommendations of 14th Finance Commission, the Centre should devolve 42 per cent out of its 50 per cent share in IGST to the States. “Accordingly, Rs 37,104 crore of Rs 88,344 crore should be devolved to the States where Telangana’s share works out to Rs 904 crore (2.437 per cent). Hence, the State’s share in IGST is Rs 4,464 crore but not Rs 1,652 crore given to the State,” he added.
He pointed out that there was a shortfall of revenue of Rs 2,812 crore to the State and stated that most States which have witnessed shortfall in revenues due to IGST transfer procedures, have received compensation. “But, Telangana State is one of the few States which did not receive any compensation in 2017-18 and 2018-19. I request the Union Finance Minister to intervene and issue necessary orders to ensure that the balance due amount of Rs 2,812 crore is released to the State as per GST Act and the Constitutional provisions at the earliest,” he appealed.