The Hindu Business Line

‘GST Council cannot vote on borrowing by States’

The Council has no jurisdicti­on on borrowing, say govt officials

- OURBUREAU

NewDelhi, October 6

Whether to borrow or not, to meet the GST compensati­on shortfall, is a decision that rests with the States and not the GST Council, said a government official.

The GST Council cannot go in for voting onthe borrowing option, said the official.

“When something which is not under the jurisdicti­on of the GST Council, how can any voting or division be permitted onthe subject,” the official said.

Another source said, “The Council has jurisdicti­on to extend the levy of cess to compensate for the shortfall in the compensati­on. It has done that.”

The Council on Monday failed to find a solution on borrowing options to meet the compensati­on shortfall as 10 States/UT want the Centre to undertake borrowing. The meeting of Council on Monday remained inconclusi­ve despite the Centre raising the funds under interest-free borrowing for States/UTs.

On August 27, the Centre offered two options to States/ UTs for borrowing to meet the compensati­on shortfall during the current fiscal.

States/UTs could either borrow ₹97,000 crore (the shortfall on account of GST implementa­tion) via a special window facilitate­d by the RBI or borrow from the open market the ₹2.35-lakh crore (the entire shortfall on account of GST implementa­tion issue plus the pandemic effect).

The Centre said, 21 States/UTs have opted for the first option and barring Odisha and Andhra Pradesh, non-BJP ruled States such as West Bengal, Punjab, Kerala, Delhi, Telangana, Chhattisga­rh and Tamil Nadu have opposed the borrowing plan.

For the first option, both interest and principal will be repaid from Compensati­on Cess Fund while under the second option, States/UT are required to pay the interest, while principal will be repaid from Compensati­on Cess Fund.

For this purpose the Council on Monday decided to extend the Compensati­on Cess levy beyond 2022.

So far as borrowing is concerned, it is the individual decision of a State and the Centre, which comes under Article 293 of the Constituti­on

WX

Assurance for States

Sources said that the decision to extend the cess is an assurance to the States that they will be fully compensate­d for any shortfall from the protected revenue of 14 per cent growth.

So far as borrowing is concerned it is the individual decision of a State and the Centre, which comes under Article 293 of the Constituti­on, and this matter is not under the jurisdicti­on of the GST Council, the official explained. “Even if there is one State wants to borrow and other States oppose the borrowing, the State choosing to borrow cannot be prevented from doing so by the other States as long as the Centre under Article 293 is willing to give permission to that State for taking a loan,” he said.

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