The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    21 states accept Rs 97,000 cr borrowing proposal to meet GST shortfall

    Synopsis

    GST Council with full presence of states and UTs needs, as per the GST Act, only 20 states to pass any resolution, in case voting is required on any issue, the sources added.

    Getty Images
    New Delhi: States that do not submit their options for borrowing before the next GST Council meeting on October 5, will have to wait till June 2022 to get their compensation dues, a senior government official said, adding that the majority of states had chosen the lower borrowing option provided by the Centre.

    At least 21 states including Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand and Uttar Pradesh have opted for borrowing Rs 97,000 crore, sources said.

    Manipur which had earlier chosen the second option of borrowing Rs 2.35 lakh crore has changed its preference to the first option.

    “If the other states do not submit their options before the due GST Council meet, then they will have to wait till June 2022 to get their compensation dues subject to the condition that the GST Council extends the cess collection period beyond 2022,” an official said.

    Opposition led states of Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal have rejected both options, and have sought the Prime Minister’s intervention.

    With 21 states, the number which was more than the required to pass any resolution in the GST Council if voting was to be done, the official added.

    “Some states have objected to the proposed two options. They are being requested to exercise one of the two options,” minister of finance Anurag Thakur said in a separate written reply in Rajya Sabha last week.

    Over Rs 1.5 lakh crore as GST compensation is pending to states for the period April-July, 2020, as the cess collected in the current financial year was insufficient to pay the dues.

    “The GST compensation cess collected till July, 2020 has been partly utilized for the purpose of GST compensation released to states for the period till March, 2020,” Thakur added.

    The Centre has put forth two borrowing options for states in the Council meeting on August 27.

    In the first, states will have to borrow Rs 97,000 crore from a special central bank facility, with repayment of the principal and interest to be serviced by the compensation cess.

    In the second, states will have to borrow Rs 2.35 lakh crore from the market, facilitated by the Centre and RBI. However, the states would bear the interest burden.

    The Centre has maintained that it is not under the obligation to compensate for loss of revenue, relying on the opinion of the Attorney General which has said that the GST Council has to find ways to meet the shortfall in compensation and not the Central government.

    In the current economic scenario it may not be possible to increase tax rates or rationalise rates to meet up the compensation shortfall, the Centre has reiterated.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Also Read

    12 Comments on this Story

    Prasen Kumar Reddy Singi32 days ago
    Is it going to be confrontation between union and states and end of GST? Ultimate sufferers are people.
    VED32 days ago
    All the money stolen from the non Hindi states by Hindi film industry can be forced to be returned to the respective states.
    Shanmugavel Arumugam32 days ago
    Why should states borrow money from the market and pay interest? Centre should pay the GST to the states. It is their money. Instead centre should borrow from the market and pay interest.
    The Economic Times