‘Centre’s borrowing options unattractive’
CHANDIGARH: Punjab finance minister Manpreet Singh Badal on Sunday said the borrowing options suggested by the Centre to the states to make up the shortfall in the goods and services tax (GST) revenue were “unattractive”.
Manpreet said both options were not only unappealing for Punjab, but also against the spirit in which every state had joined the new indirect tax regime. “When we agreed to be part of the GST regime, there was no ambiguity that whenever there is any shortfall, it will be made good by the Government of India,” he said, virtually rejecting the Centre’s borrowing propositions.
The Centre has computed the shortfall at an estimated Rs 2.35 lakh crore during the current financial year, stating that Rs 97,000 crore of that is on account of GST implementation, and the remaining was due to the coronavirus pandemic. At the 41st meeting of the GST Council three days ago, the states were given two borrowing options by the Union finance ministry to plug this revenue shortfall.
In option 1, states will not have to pay either the principal or interest if they opt to borrow only Rs 97,000 crore. The interest and principal will come from the compensation cess levied on luxury products and ‘sin goods’. In case they choose to borrow the entire amount of shortfall in the estimated compensation cess (option 2), they will have to raise it from the market and bear interest costs from their own resources.
Manpreet said the central government was telling the states to borrow, whereas it (Centre) should have paid, morally and legally. He said the state’s GST compensation was getting delayed and not being released on time. “If we accept their proposal, this is like mortgaging our future earnings for today. The money will have to be paid from the state’s resources, whereas it should come from the Consolidated Fund of India. The states have huge responsibilities such as health, education, transport, municipalities, power, and social security,” he said, a day after the Union finance ministry shared more details on its proposal.
He said there should be a “third option” and the finance ministers of non-BJP states would hold a virtual consultation, most probably on Monday itself, to move forward together. The Centre has given a week’s time to states to think over the proposal. Punjab’s revenue shortfall is around Rs 6,700 crore in the first four months of the current fiscal. Under the new indirect tax regime, the states have been guaranteed a 14% year-on-year growth in their GST revenue over the financial year 2015-16 base and they are to be compensated by the central government for any shortfall.