The Ministry of Finance (MH) allowed 20 states to collect on Tuesday ₹Rs 68,825 crore through loans to cover GST’s revenue shortfall. This comes a day after the Goods and Services Tax Council (GST) met on Monday without reaching a consensus on compensation from the states.
An additional debt permit at 0.50% of the State’s Gross Domestic Product (GSDP) has been granted to those states that have opted for Option 1 of the two options suggested by the Ministry of Finance to cover the deficit arising from the implementation of the GST.
Here are the state details:
₹ 68,825 crore through loans to cover GST’s revenue shortfall. “Title =” 20 states will raise ₹ 68,825 crore through loans to cover the GST revenue shortfall. “>
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At the GST Council meeting, which was held on August 27 this year, these two options were raised and subsequently communicated to States on August 29.
Twenty states have given their preferences for Option 1. These states include: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha , Sikkim, Tripura, Uttar Pradesh and Uttarakhand. However, eight states have yet to exercise an option.
Facilities available to states that choose Option 1, among others, include:
- A special debt window, coordinated by the Ministry of Finance to borrow the amount of the deficit in income through the issuance of debt. The total deficit in state revenue on this account has been estimated at about ₹Rs 1.1 million lakh.
- Permission to borrow the last 0.5% installment of the GSDP of the 2% additional loans allowed by the Government of India in view of the COVID pandemic, waiving the condition of reforms.
As of early May 17, the Spending Department had provided an additional borrowing limit of up to 2% of the GSDP to states. The last 0.5% share of this 2% limit was linked to the completion of at least three of the four reforms stipulated by the Government of India.
However, in the case of the states that have exercised Option-1, to cover the deficit derived from the implementation of the GST, the condition of carrying out the reforms has been waived to take advantage of the last 0.5% quota of the GSDP.
Therefore, the 20 states that have exercised Option 1 have become eligible to raise an amount of ₹Rs 68,825 crore through open market loans. Action on the special loan window is being taken separately.
‘No consensus was reached between the states’
The Modi government and the dissident states on October 12 failed to reconcile their differences on the issue of GST compensation in a dedicated meeting of the federal body held via video conference, at a time when most states are hungry. of funds in view of the Covid-19 pandemic.
No consensus has been reached on how to make up for the states’ GST deficit, Sitharaman said after the meeting concluded. Sitharaman also said that the government will make it easier for 21 states that want to borrow to fill the gap in GST compensation.
“There is no unanimity but that does not mean there is a dispute. (GST Compensation) ces has been extended beyond five years. If (many) states are willing to borrow, we will make it easy. I don’t expect a dispute, “Sitharaman said.
After yesterday’s GST Council meeting, Kerala Finance Minister Thomas Isaac wrote on Twitter: “It is regrettable that Union FM does not propose a decision in the Council or even make a statement on what it is going to do, rather, choose to make the announcement in the press conference. Why does the Center refuse to make a decision in the Council? Total disregard for democratic norms. “
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