NEW DELHI: Up to 21 states, mostly governed by the BJP or parties that have supported it on various issues, have chosen to borrow Rs 97 billion to comply with GST revenue shortfall in the current fiscal, sources said Sunday.
The states and territories of the union (UT) that have made their decision known to the Center are 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.
Finance Ministry sources said that Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal have yet to respond to the GST Council’s proposal to decide their options.
States that do not submit their loan options prior to the appropriate GST Council meeting on October 5, 2020 will have to wait until June 2022 to receive their compensation fees, subject to the condition that the GST Council extend the tax collection period beyond 2022, the sources said.
The GST Council with full presence of states and UT needs only 20 states to pass any resolution, in case a vote is required on any issue, the sources added.
In the current prosecution, the states are looking at a staggering Rs 2.35 lakh crore Tax on goods and services (GST) income deficit.
Of this, according to the Center’s calculation, the shortfall of around Rs 97,000 crore is due to the implementation of the GST and the remainder of Rs 1.38 lakh crore is due to the impact of Covid-19 on state revenues.
At the end of last month, the Center gave two options to states to borrow Rs 97,000 crore from a special window provided by the RBI or Rs 2.35 lakh crore from the market, and also proposed to extend the offsetting tax imposed on luxury goods, demerit and sin beyond. 2022 to repay the loan.
Sources said few other states will also hint at their borrowing option in a day or two.
They added that Manipur, which had previously chosen to borrow Rs 2.35 lakh crore, later changed its preference to the Rs 97,000 crore option.
States not governed by the BJP disagree with the Center on the problem of funding shortfalls.
The top ministers of six states not governed by the BJP – West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu – have written to the Center opposing options that require states to borrow to cover the deficit.
While these states want the Center to borrow to cover the shortfall, the Center has argued that the proceeds from the GST offset tax go to the states and the Center cannot borrow with the guarantee of the tax that does not belong to it.
Under the GST framework, taxes are collected below the 5, 12, 18 and 28 percent slabs. In addition to the higher tax slab, a luxury, sin and demerit tax is levied, and the proceeds from these are used to compensate the states for any loss of income.
The Attorney General of India, KK Venugopal, had given his legal opinion on the issue of termination of compensation when he was of the opinion that the Center is under no obligation to compensate for loss of income under GST laws.
He had been of the opinion that the GST Council has to find ways to cover any revenue shortfalls arising from the implementation of GST.
The payment of GST compensation to the states became a problem after the revenue from the imposition of the fee started to decline since August 2019. The Center had to dive into the excess amount of the fee collected during 2017- 18 and 2018-19 to pay the states.
The Center had released more than 1.65 lakh crore rupees in 2019-20 as GST compensation. However, the amount of taxes collected during 2019-20 was 95,444 million rupees.
The compensation payment amount was Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18.
During April-July of the current prosecutor, the total compensation owed to the states amounts to more than Rs 1.51 lakh crore.
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