Modi on that occasion had said that GST was an example of cooperative federalism as the centre and states together thrashed out the new law. He had assured the states that GST will create a seamless unified market for the $2 trillion Indian economy. He termed the GST as a ‘good and simple tax’ which will end harassment of traders and small businesses while integrating India into one market with one tax rate.

Displaying high order of ebullience he claimed that being a transparent and fair system GST will end generation of black money and corruption and will promote new governance culture that will end harassment at the hand of tax officials.

He used the occasion to assure the nation that it would embark upon a new economic regime. The importance of floating GST could be gauged from the fact that he even went upto reminiscing the 9th of December, 1946 when Central Hall witnessed the first meeting to discuss the country’s Constitution.

But to the horror to the country all his tall claims fell flat. The GST is caught in a blind alley. It was an exercise of bluff. The states are denied of their share. The situation has deteriorated to such an extent that the states may not be in the position to pay the salary of their employees from next month. The Centre has asked the states to borrow the amount of the shortfall through an arrangement with the RBI but this is not the correct approach and is loaded with the possibility to backfire. Why should a state borrow from RBI?

As per the Finance Ministry, the shortfall in state GST collections this year is likely to be around Rs 3 lakh crore. Of this, Rs 65,000 crore will be collected through the cess route, implying a shortfall of Rs 2.35 lakh crore. The compensation due, but not paid to states, for the April-July period stands at Rs 1.5 lakh crore, as against cess collections of only Rs 14,482 crore in the first quarter of the current financial year.

For states, revenue from GST accounts for roughly a third of their revenue receipts in 2019-20 (BE). The states are now primarily dependent on revenues from the sale of wine and alcohol. The country has been left to lurch is evident from the observation of the finance minister Nirmala Sitharaman who described the situation "an act of God". She said; “We are facing an extraordinary situation. We are facing an act of God where we may even see a contraction". This is a very serious observation coming from the finance minister who so far had maintained that Indian economy was in safe hands and was growing. Sitharaman confessed “The centre has released over Rs 1.65 lakh crore as GST compensation to states for fiscal 2020, including Rs 13,806 crore for March, while cess collected for GST compensation was only Rs 95,444 crores.”

The centre is hard-pressed on paying GST dues to states that have not earned much this year due to months of lockdown necessitated by the COVID-19 crisis. Punjab, for example, has said it may see a revenue deficit of Rs 25,000 crore this year. "Government of India owes us Rs 4,400 crore for a small state like Punjab for which the total salary bill is Rs 1,800 crore. It is getting difficult for us to run the state," Punjab Finance Minister Manpreet Singh Badal tweeted.

Compensation payments to states are pending for the four months of this financial year — April, May, June, and July. The Revenue secretary said the total GST compensation to be paid to states was Rs 1.5 lakh crore. “This is so because there was hardly any GST Collection in April and May,” he said.

Under GST law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Sitharaman blaming the God was a clever ploy to shield the “cronyism, incompetence and callousness" that destroyed the economy. Since Modi and his men have destroyed the economy, his government must borrow and pay the states their legitimate dues. Why should the states borrow? After destroying the Indian Economy now they are looting the states on the pretext of Divine intervention? Modi and his incompetent people do not feel ashamed at the existing sight.

There is no denying that Narendra Modi has failed the country and betrayed its economy. One of the criticisms against the GST is that it has not been able to merge multiple tax rates into a leaner structure. Ironically Modi even admitted that despite tax reforms, India's economy is unlikely to have a single tax market.

The most shocking has been the people close to Modi has been feeding wrong information as the country's tax base has expanded and income tax collections have also gone up.

Some people had refused to subscribe to my earlier view that Modi and his government have been deliberately allowing the Indian economy to depreciate. He has been doing it under a well-planned design. Finance Minister Nirmala Sitharaman blaming God for the economic crisis is the candid example of the design. God was not expected to rule India and put the economy on right track. The fact of the matter is mismanagement by the Modi government had derailed growth much before the pandemic struck.

This is not happening for the first time. Already six successive quarters had witnessed decline in the GDP growth rate, the worst phase in 23 years. Responding to the “act of God” excuse, Congress leader Rahul Gandhi tweeted: “India’s economy has been destroyed by three actions: Demonetisation, flawed GST and failed lockdown. Anything else is a lie.”

Though Parliament passed a law that the Centre will compensate states for GST shortfalls for five years it is irony that the Centre is now passing the buck to states, telling them they should borrow to make up shortfalls. Centre in true sense was abdicating its legal obligations. (IPA Service)