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The Goods and Services Tax (GST) Council needs a course correction to restore consensus-based approach in decision making, West Bengal finance and planning minister Amit Mitra told union finance minister Nirmala Sitharaman on Wednesday.

Mitra’s concern that the GST Council, the only federal body with law making and taxation powers, has become almost toxic, comes a day after Prime Minister Narendra Modi said Centre-state partnership was instrumental in policy making during the pandemic.

In a letter to Sitharaman on Wednesday, Mitra pointed out that meetings of the Council have become acrimonious, vexing and almost toxic with erosion of mutual trust that had held fast between the Centre and states since the inception of the Council. Mitral also referred to instances in the past where the Central government and states have accepted each others’ suggestions on important issues such as setting the threshold for GST registration.

“I urge you Honourable Minister to kindly introspect on what I have taken the liberty of bringing to your attention with utmost sincerity and frankness, so that you may consider a course correction in the matter of functioning of the GST Council," Mitra said in his letter. Mint has reviewed a copy of the letter. Mitra also assured Sitharaman that states will respond in equal measure if the Centre brings back a consensual atmosphere that had defined the Council since its inception.

Mitra’s suggestions indicate the rift within the Council along political lines. Non-BJP ruled states have been voicing their concerns about GST compensation, need for full GST relief on all covid-related medical supplies and an officials’ panel allegedly making significant rule changes outside the political oversight of the Council.

“Frankly speaking, Honourable Minister, an undercurrent has emerged in recent times that while the Chair hears the submissions of all states patiently, indeed, there is a pre-determined conclusion with which government of India, aided by its top bureaucrats, comes to the GST Council meetings," said Mitra in his letter.

What has worsened the rift between the ruling party at the Centre and non-BJP ruled states is the fiscal pressures precipitated by the economic downturn, while spending requirement has gone up. In the case of West Bengal, damages caused by cyclone has added the burden. For FY22, the central government has fixed net borrowings of the state at 4% of Gross State Domestic Product (GSDP) out of which 0.5% is linked to capital spending targets.

An email sent to the finance ministry seeking comments for the story remained unanswered at the time of publishing.

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