Five states not governed by the BJP on Monday rejected a proposal put forward by the central government at last Thursday’s Goods and Services Tax (GST) Council meeting that states could borrow to cover their current shortfall in GST revenue.
The states agreed during a meeting of finance ministers from Punjab, Delhi, Kerala, Telangana and West Bengal to reject both borrowing options proposed by the Center, Chhattisgarh finance minister TS Singh Deo said in a tweet.
They also unanimously decided that the Center should not delegate its constitutional obligation to fill the income gap from the states to the states. The position of the states indicates that opposition parties could align themselves on economic issues. This is significant considering that political differences on GST-related issues could have an impact on the next monsoon session of Parliament.
On Thursday, the Council offered states two loan options to overcome the GST revenue shortfall, as the GST tax collected from items such as cars and tobacco was not adequate to offset them this financial year.
According to this, states could borrow ₹RBI 97 billion rupees or ₹2.35 billion of the market in different terms.
“It was agreed between the States that the Center should fill the deficit and, more importantly, it should only move forward through consensus in the GST Council rather than trying to push its agenda in a majority way,” Deo said.
He also said that the revenue shortfall was not an “act of God” as suggested by the central government.
Kerala Finance Minister Thomas Isaac said states had no choice but to reject the proposals. “Now that we fully understand the intentions of the Center on GST compensation, we have no choice but to turn them down with lock, stock and barrel,” Isaac said.
“Enough is enough. No more cession of the rights of the states. GST compensation is our constitutional right,” Isaac said in his tweet.
Punjab Finance Minister Manpreet Singh Badal said in a letter to Union Finance Minister and GST Council Chairperson Nirmala Sitharaman that both loan options offered constituted a violation of the constitutional guarantee of compensation to states. . “Therefore, we take both options with great regret as a clear violation of the solemn and constitutional guarantee of the Central Government. We believe this is a betrayal of the spirit of cooperative federalism that formed the backbone of the GST journey so far, “Badal said in the letter. Mint has seen a copy of the letter.
Delhi Chief Deputy Minister Manish Sisodia, who also holds the finance portfolio, said in a statement that the five states resolved that the only legally sustainable option to overcome the states’ GST deficit was to allow the central government to borrow the total deficit of Rs 2.35 trillion. through RBI or any other suitable mechanism. “The repayment of principal and interest liability must start from 2022 and must be paid in full with the receipt of the tax for which the GST Council must extend the tax period of the tax beyond five years or until the moment in which the debt is required to be paid, “Sisodia said.
Pretika Khanna contributed to this story.
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