A meeting of the Council on Goods and Services Tax (GST) on Monday ended once again without any conclusion and the stagnation in compensation to states for the deficit in their share of indirect tax revenue continues, the finance minister said. of the Union, Nirmala Sitharaman.
Nirmala Sitharaman’s comments came after another marathon meeting of the GST Council, as she said there is no dispute, but “we may have differences on compensation from the states.” “We could not reach a consensus. I made an appeal to all states … This is how the GST Council meeting ended today, “Sitharaman said during a press conference.
Sitharaman, who heads the Council, said that the Center cannot borrow and pay the states for the deficit as it would lead to an increase in bond yields, resulting in increased borrowing costs for the government and the private sector. However, this would not be the case if states were to borrow against future GST receipts, he said, adding that 21 states had agreed to borrow as the Center suggested. However, other states insisted that the decision be made by consensus, he said.
“The collection of the fee is inadequate to pay compensation. This is absolutely evident for all to see and since it is something that was never foreseen, the deficit will now be solved with loans, “he said.
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“The Center has issued a loan schedule, if I go beyond that to borrow, the G-Sec agreements that are used as a benchmark for all other loans will increase, this will therefore increase the costs of indebtedness for the states and the private sector as well, “he said. He said.
The finance minister said 12 states had accepted the Center’s repayment proposal to borrow from the markets on their own, and nine others wanted the Center to make the loan. Sitharaman said he has asked for time to consider the demands of these nine states.
“We are open to anyone who wants us to facilitate any loan. Many people have chosen Option 1 and some will be approaching us tomorrow morning. We are ready to deal with that, ”he said.
This was the second time after October 5 that the GST Council failed to reach consensus on the Center’s proposal that states borrow against future GST collections to make up the shortfall. This was also the third meeting in a row during which the discussion on the compensation deficit problem took place and ended without a decision.
At its last meeting on October 5, the GST Council had deferred a decision on the question of compensating states for the deficit after 10 states ruled by parties not belonging to the National Democratic Alliance (NDA) insisted that the Center will borrow the entire Rs 2.35 lakh crore and repay them. Up to 21 states, most of which are governed by or supported the BJP on various issues, have chosen to borrow Rs 1.10 lakh crore to cover the compensation gap. The Center has released 20 billion rupees to states to cover the compensation deficit so far in the current fiscal.
In August, the Center had given states two options to borrow Rs 97,000 crore from a special window provided by the Reserve Bank of India (RBI) or Rs 2.35 lakh crore from the market. He had also proposed extending the compensation rate imposed on luxury, demerit and sin goods beyond 2022 to repay the loan. Following demand from some states, the amount of Rs 97,000 crore was increased to Rs 1.10 lakh crore.
Sitharaman had said that 21 states have chosen loan option 1 to make up the revenue shortfall due to the implementation of the GST. He clarified that the Center is not denying compensation to any state, but those that have not chosen any debt option have to borrow from the market.
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