Addressing the media after the meeting, Nirmala Sitharaman said that the Center cannot borrow and pay the states for the deficit, it is the states that need to borrow as this would lead to an increase in the yields of bonds, which would result in an increase in borrowing costs for the government and the private sector.
These are the main developments of the GST Council meeting:
* No consensus was reached on how to compensate for the GST deficit of the states: Sitharaman
* The Center is open to anyone who needs facilitation. Option 1 has already said many people and even today they said that tomorrow morning we are approaching to borrow from the market: FM
* If there are states that want to borrow, we will make it easy and I have also kept the option completely open for states to come and talk. If they have any questions, I’m ready to interact with them: FM
* With regard to the compensation deficit, it is for everyone to understand that the collection is inadequate. Since this is something that was not foreseen, the deficit must be covered with loans: Minister of Finance
* The center has issued a loan schedule, if I go further to borrow, the G-Sec offers that are used as a reference for all other loans will increase. This will also increase borrowing costs for states and the private sector: Minister of Finance
* Increasing borrowing costs is not something we can afford at a time when India is looking for more money to invest and borrow to do business: FM
* There was no unanimity among GST Council members on loans: FM
* The impact would not be as severe if states borrowed: Sitharaman
* The states getting into debt does not mean a chaotic situation, we will facilitate the states so that some of them end up paying high interest rates while others obtain loans at a reasonable rate: FM
* The GST Board has been kind enough to unanimously agree to extend the cessation beyond 5 years, to reimburse the principal and interest of the full compensation. There is no dispute about this, full compensation must be paid, will be paid: Sitharaman
* Certain amounts were awarded to states on a percentage basis, and some based on actual amount, on the award given by the 15th finance commission last year before Covid. All these activities have been carried out even during Covid: FM
* The States requested some specific clarifications, which were given. Many of the clarifications were based on the opinion of the Attorney General on loans, the authority of the GST Council to extend tax collection beyond 5 years: Sitharaman
* States expressed satisfaction with the demand stimulus we have provided through the LTC Cash Voucher Program and the Festival Special Advance Program. I have also asked states to propose similar schemes for India’s recovery from Covid-19 to have an impact on the arm: Sitharaman
* I am very grateful that the GST meeting began with each state thanking the Center for the 50-year interest-free loan provision announced today as well as the allocation of additional funds for capital expenditures: FM
* Today’s meeting was a continuation of the 42nd. GST Council Meeting, to discuss an agenda item, namely, no. 9A. Discussions continued on the issue of loans, the extension of the tax, etc .: Sitharaman
* At its previous meeting, the GST Council had decided to extend the compensation levy beyond the five-year transition period for as long as it takes to fill the income gap.
* The Center, at the request of the States, also decided to increase the deficit amount to Rs 1.10 lakh crore from Rs 97,000 crore under the loan option.
* In August, 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 compensation rate imposed on luxury goods, demerit and sin beyond 2022 to repay the loan.
* When the GST was introduced in July 2017, states were promised an additional 14 percent revenue over their last tax revenue in the first five years of GST implementation. This was to be done through a tax or surcharge on luxury goods and sin, but collections in this regard have fallen short with the slowdown in the economy since the last fiscal year.
(With contributions from the agency)
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