The Free Press Journal

Deadlock over GST continues between Centre and states

-

NEW DELHI: A crucial meeting of the GST Council on Monday failed to reach a consensus on ways to compensate states as the panel was split on political lines over using borrowing as a tool.

The GST Council will meet again on October 12 to discuss and try to reach a consensus between state government­s and the Centre on the borrowing options for GST compensati­on, Finance Minister Nirmala Sitharaman said on Monday.

The decision taken to meet again in October was suggested by Bihar Deputy Chief Minister and Finance Minister Sushil Modi, after the Council's Monday meet failed to break the deadlock between the Centre and the state government­s on the issue of compensati­on.

Addressing a press conference after the meet, Sitharaman said that only because 20 states accepted Option 1, does not mean that it can be thrust upon others. "We need to talk

further."

In a sober tone, she said: "I was gently reminded that I can not take anybody for granted... Although I don't take anybody for granted."

Earlier at the 41st meeting of the GST Council, the Centre had proposed two options to state government­s to cover the compensati­on gap and meet their expenditur­e requiremen­ts amidst the Covid-19 disruption.

The first option given by

the Centre is to provide a special borrowing window to states, in consultati­on with the Reserve Bank of India, to provide Rs 97,000 crore at a "reasonable" interest rate.

The debt, along with accrued interest, can then be repaid to the states after five years from collection of cess.

At Monday's meeting, the Council also recommende­d extension of GST cess beyond the transition period of five years i.e. beyond June 2022 for such period as may be required to meet the revenue gap.

The Centre had also proposed to give a further relaxation of 0.5 per cent in states' borrowing limit under the FRBM Act as the second leg of the first option. This will allow states to borrow more unconditio­nally to cover their earning shortfall on accounts of GST and Covid19.

States can choose to borrow more, beyond the expected compensati­on itself, since that is the injury caused by the pandemic.

The second option was to meet the entire GST compensati­on gap, estimated at Rs 2.35 lakh crore, this year itself, through borrowings after consulting the RBI.

The borrowing window will allow states to mobilise debt at uniform rates linked to government bonds.

The states have the option to borrow less or more depending on the need.

Newspapers in English

Newspapers from India