Amit Mitra has written to Nirmala Sitharaman urging her to convene a meeting of the GST Council (Archive)
Calcutta:
West Bengal Finance Minister Amit Mitra has written to the Union Finance Minister Nirmala Sitharaman, urging her to convene a meeting of the GST Council to discuss the Center’s loans to cover the collection shortfall.
In the letter written on November 13, Mitra said that many states had argued at GST Council meetings in August and October that the central government was borrowing from the RBI’s special window to fill the gap between protected income to a growth rate of 14 percent and GST. collections.
Regarding this, Mitra said that West Bengal’s chief minister, Mamata Banerjee, also wrote to Sitharaman in this regard on 10 October.
He said it had been unanimously agreed in meetings to extend the tax collection period beyond 2022 to meet the borrower’s debt service.
However, Mr Mitra stated that the Center had submitted a new proposal by dint of which it will borrow two-thirds of the deficit set at Rs 1.10 lakh crore until January 2021, while the remaining deficit of Rs 72,000 crore will be received by the states only after June 2022.
He said the new proposal also provided an additional borrowing cap of 0.5 percent of the GSDP to states to facilitate loans of Rs 72 billion.
This, he said, amounts to the Center borrowing only two-thirds of the deficit and declaring the remaining portion, if required, from the market.
According to Mr. Mitra, the RBI 1.10 lakh crore loans from the RBI special window will not affect the Center’s fiscal deficit, which will be fully financed by tax revenues.
Mitra said the Center had been able to borrow from the special window at five percent, while states had to pay 6.8 percent higher, implying a substantial debt service burden will be placed on them.
In this context, Mr. Mitra said that due to the interest rate differential, the Center would have to borrow the full amount of the special window.
He said that due to the pandemic and Cyclone Amphan that hit West Bengal, the state is already in dire financial straits. Mr. Mitra said that the Center should call a council meeting to reach a unanimous decision and thus uphold the spirit of cooperative federalism.
(Except for the headline, this story has not been edited by NDTV staff and is posted from a syndicated feed.)
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