New Delhi: At least 13 states have offered their loan options that were discussed at the Goods and Services Tax (GST) Council meeting last month to fill their GST income gap.
Another six states are expected to give their option in the next two days, said a person familiar with the development. Of the 13 states that have already given their borrowing preferences, only Manipur opted for the second borrowing option that allows the state to borrow the entire GST income shortfall, including the income gap caused by the GST pandemic. Coronavirus
The other 12 (Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Madhya Pradesh, Meghalaya, Sikkim, Tripura, Uttar Pradesh, Uttarakhand and Odisha) have chosen to borrow funds from an RBI window that would cover the GST income gap That can be attributed to the implementation of GST, said the person who spoke on condition of anonymity.
Six other states: Goa, Assam, Arunachal Pradesh, Nagaland, Mizoram and Himachal Pradesh are expected to give their options shortly.
Some states, which have not yet decided on the options, have presented their views to the chairman of the GST Council, the union’s finance minister, Nirmala Sitharaman.
Non-BJP-governed states such as Kerala, West Bengal, Punjab, and Delhi have already rejected both borrowing options and are urging the union government to borrow and repay states rather than asking states to borrow themselves. themselves.
The central government recently clarified to the states that it committed to fully honor the revenue shortfall, which involves paying for revenue losses that can be attributed to the implementation of the GST within the five-year transition period (2017-2022) , while revenue lost due to the impact of the coronavirus can be paid for thereafter by extending the GST tax on luxury goods and sin beyond 2022. With these states taking an uncompromising stance so far, the next is expected GST Council meeting is stormy.
The Council has 33 members, including the president and the union’s minister of state for finance, Anurag Thakur. Until now, all the Council’s decisions, except one regarding the taxation of lotteries, have been adopted by consensus. The fiscal problems of the central and state governments appear to have dealt a blow to the consensus-based approach in the Council. In the federal fiscal agency, neither the Center nor the states together can make a decision without mutual support.
According to the central government, there is enough room for states to borrow as, on average, states have so far borrowed only about 1.25% of state gross domestic product (GSDP) and only a few states have reached about the 2% of the GSDP. In addition, the Center has already improved its borrowing limit from 3% to 5% of the GSDP. The central government maintains that the Center’s loans would have a greater impact on the market and boost the G-Sec rate, the benchmark rates for other loans, including loans from state governments. Therefore, any loan from the Center would crowd out private sector loans and make loans expensive for entrepreneurs.
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