The Hindu Business Line
‘GST Council cannot vote on borrowing by States’
The Council has no jurisdiction on borrowing, say govt officials
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
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.