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Oppn-ruled states to oppose borrowing option at GST meet

Tribune News Service

New Delhi, October 4

The GST Council meeting on Monday will be a test for cooperative federalism as 10 states, including Punjab and Kerala, have not opted for the Centre’s borrowing option. Twenty-one state and UTs, on the other hand, have accepted the arrangement offered by Union Finance Minister Nirmala Sitharaman.

The pandemic has affected states, increasing their dependence on GST compensation as against internal revenue generation. The situation is particularly dire for Punjab, Himachal Pradesh, Uttarakhand and Chhattisgarh.

Bid to bridge compensation shortfall

At the last GST Council meeting on August 27, the Centre gave two options: Borrow Rs97,000 crore from a special RBI window or lift the entire Rs2.35 lakh crore from the market
The CMs or Finance Ministers of Punjab, West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu have already opposed both options

One of the rare examples of a consensus-driven approach since its inception, Monday’s GST Council is expected to see non-BJP ruled states demand that the Centre should borrow on their behalf to meet the shortfall. Battle lines have hardened, as the Centre, on the strength of legal advice from Attorney General KK Venugopal, believes that it cannot borrow for the states on the basis of the security of the tax it does not own.

The crux of the matter is that the Centre has been unable to pay states Rs 2.35 lakh crore. However, it says it is obliged to pay only Rs 97,000 crore, as the remaining shortfall of Rs 1.38 lakh crore is due to the Covid pandemic.

At the last GST Council meeting on August 27, the Centre gave two options: Borrow Rs 97,000 crore from a special RBI window or lift Rs 2.35 lakh crore entirely from the market. The CMs or Finance Ministers of Punjab, West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu have already opposed both options.

On the other hand, states and UTs run by the BJP and its allies have agreed to the option of borrowing Rs 97,000 crore through a special window. But they too have sought some tweaks in the arrangement.

The Centre expects to collect only Rs 65,000 crore as cess as against the requirement of Rs 3 lakh crore this year, leaving a gap of Rs 2.35 lakh crore, assuming 10 per cent year-on-year revenue growth.