Most states choose ₹97k cr borrowing to plug GST deficit

NEW DELHI: A majority of state governments have chosen to borrow ₹97,000 crore to plug a shortfall in revenue from the Goods and Services Tax (GST) rather than borrow the entire deficit of ₹2.35 lakh crore, which may leave no choice to dissenting states but to fall in line, finance ministry officials said.

Otherwise, states that have opposed the proposal would have to wait 19 months to get the money, the officials said. To be sure, most of the states that have responded are ruled by the Bharatiya Janata Party (BJP).

The Centre has already received approval of 21 states for the first option of borrowing ₹97,000 crore to plug the shortfall accruing because of implementation bottlenecks; the states wouldn’t have to pay either the principal or interest.

Even Manipur, which had initially opted for the second option of borrowing the entire ₹2.35 lakh-crore shortfall, accruing as a result of both implementation issues and the Covid-19 pandemic, has now revised its decision in favour of the first option, two officials with direct knowledge of the matter said, requesting anonymity. The larger borrowing comes with significant interest costs.

The officials said the Centre is confident that the first option will be approved by the GST Council, which is headed by the Union finance minister and comprises state finance minister, as it needs only 20 states to pass any resolution, if members insist on a vote.

Opposition-administered states such as Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana,

and West Bengal have not yet communicated their choices to the government as yet, the officials said.

States and Union territories (UTs) in favour of the first option are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, HP, J&K, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand and Uttar Pradesh, the officials said.

The two options were put to the states at the 41st meeting of the GST Council on August 27. Some states, where opposition parties are in power, such as Delhi, Kerala, Punjab, West Bengal (WB), Maharashtra and Chhattisgarh, have been opposing the Centre’s proposals, insisting that the Central government borrow the money and reimburse them, instead.

“If the rest of the states do not submit their options before the due GST Council meet on October 5, 2020, then they will have to wait till June 2022 to get their compensation dues,” officials said.

THE CENTRE HAS RECEIVED THE APPROVAL OF 21 STATES FOR THE FIRST BORROWING OPTION OFFERED TO PLUG THE REVENUE GAP