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NEW DELHI: At least 13 states have offered their loan options, proposed by the GST Council, to address your compensation deficit and six more states: Goa, Assam, Arunachal Pradesh, Nagaland, Mizoram and Himachal Pradesh – It is expected to do so shortly, sources from the Finance Ministry said on Sunday.
The 12 states that preferred loan option 1 are Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Madhya Pradesh, Meghalaya, Sikkim, Tripura, UP, Uttarakhand and Odisha. So far, only one state, Manipur, has opted for the second option.
Some states have presented their views to the chair of the GST Council and have yet to decide the options. The council, at its 41st meeting in late August, had provided states with two loan options to enable them to cover their compensation deficit.
at the lowest possible interest rate at the RBI one-stop shop provided by the ministry of finance according to your individual choice.
Option 1 offered the states to borrow the deficit arising from the implementation of the GST, estimated at approximately Rs 97,000 crore, by issuing debt under a special window coordinated by the Ministry of Finance.
The second option has offered states to borrow the entire compensation deficit of Rs 2.35 lakh crore (including part of the impact of Covid) by issuing market debt.
Several states, particularly those ruled by opposition parties, had rejected the options offered by the Center, saying they would put them under a huge debt burden and further cripple their finances. They had asked the Center to borrow on behalf of the states.
The latest council meeting took place in the context of the attorney general’s opinion on the issue of termination of compensation, where he said that the Center has no obligation under GST laws to compensate for lost income. According to the attorney general, it is the GST Council that has to find ways to cover the compensation deficit and not the Center.
The meeting discussed that in the current economic scenario it may not be possible to increase tax rates or rationalize rates to cover the compensation deficit. However, borrowing could be an option to address this challenge.
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