Andhra Pradesh Chief Minister Jaganmohan Reddy has said that borrowing is the only way to overcome the crisis facing states amid the Center’s inability to repay the Rs 2.35 lakh crore shortfall in their participation in income from the goods and services tax (GST) this financial year.
“The only way to overcome the crisis is to borrow. The Center has also asked states to apply for additional loans. Since we cannot tax people more, we are working on possible additional income generation options, ”said Reddy in an interview with HT.
Reddy’s comments came even as some states objected to the option to borrow the Center from states due to delays in GST compensation.
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West Bengal Finance Minister Amit Mitra said on Monday that state governments were not in a position to borrow money from the market and criticized the Center for imposing the idea on them without due consultation.
At a GST Council meeting on August 27, the Center gave states the option of borrowing the amount of compensation derived from the implementation of GST (Rs 97,000 crore) or the entire deficit (Rs 2.35 lakh crore). If you exercise the first option, the interest and principal amount will come from the rate on products such as liquor, cigarettes, sparkling water and automobiles. In the case of the second option, the states must bear the burden of interest.
Reddy said the Center is taking its time and paying a little late, but it’s not like there has been a drastic reduction. “They have been passing [the money] with some delays. This is understandable, considering the Covid-19 situation and its impact on the country’s economy, ”he said.
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The Covid-19 pandemic and the subsequent 68-day hard lockdown have hit the economy, causing a 23.9% contraction in the quarter ending June 30.
HT reported Tuesday that the Center remains committed to reimbursing the states for the entire deficit and that immediate compensation may not be obtained.
West Bengal Chief Minister Mamata Banerjee wrote to Prime Minister Narendra Modi on September 2 saying she was “deeply distressed” by the mess of the GST, which violated the very premise of federalism. She said that the Center has an obligation to compensate the states.
Some states have required the Center to borrow the money. Kerala Finance Minister Thomas Isaac tweeted: [finance ministers] from Punjab, Delhi, W[est] Bengal, Chhattisgarh, Telangana and Kerala agreed to reject the Center’s options on GST compensation. Our option: For the central government to borrow the full compensation owed, regardless of the acts of gods, humans or nature, to be repaid through the extension of the Cess period. “
Isaac was referring to the comment by the Union’s finance minister, Nirmala Sitharaman, on the compensation crisis caused by “an act of God.”
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