During the GST Council meeting on August 27, the government of India has invoked the force majeure clause (a phrase in French for superior force or the act of God) to renege on its statutory obligation to make good the loss incurred by states on account of switching over to the Goods and Services Tax.
The Centre argued that the shortfall in revenue collection was because of an extraordinary situation caused by a pandemic and that it is not bound to make good loss caused by an act of God.
The Central government’s argument was based on two factors — one, the promise that it made to states to make good its revenue loss on account of the GST rollout, and two, a contraction that the Indian economy is expected to witness this financial year (FY2020-21).
The Narendra Modi government believes that the revenue shortfall would be considerably more because of the Covid-19 drag on the economy and should not be attributed to the GST.
According to the Union finance ministry’s estimates, the loss to states on account of GST rollout is Rs 97,000 crore, while the overall shortfall in revenue is Rs 2.37 lakh crores. Since the overall loss of revenue is more than double the loss caused by the GST rollout, the Centre refused to bail out states using funds from its coffers. This argument, however, glosses over one crucial point.
While agreeing to the GST regime, the states had sought compensation for the loss caused to them on account of relinquishing their financial independence. If the states had not acceded to the GST regime, they would have been free to raise revenue depending on their local circumstances.
They would not have been forced to stand before the GST Council with a begging bowl.
The Centre also cannot wash its hands of the revenue shortfall because of the decline in the economic growth had started in the last financial year itself.
It would, therefore, be entirely wrong to blame God because coronavirus did not emerge in the country suddenly out of blue.
Even if we accept that God has sent coronavirus to punish us, he has given enough opportunity for India to take steps to protect itself from the most infectious pathogen.
However, it was overconfidence of the Narendra Modi government that was busy in welcoming US President Donald Trump and unseating the Kamal Nath government in Madhya Pradesh which brought the country to this pass.
Since the Narendra Modi government has invoked force majeure to escape its responsibility, one wonders if the ordinary citizens too would have an opportunity to escape their contractual responsibility to pay loan instalments without attracting legal action by banks.
Why should there be different yardsticks for the Central government and its citizens?
After all, the Bhagavad Gita says, “Whatever actions great persons perform, common people follow. Whatever standards they set, all the world pursues”. Will Sangh Parivar ideologues advise Prime Minister Narendra Modi and finance minister Nirmala Sitharaman to let citizens follow examples set by them?
