The 42nd meeting of the Goods and Services Tax (GST) Council, which was scheduled to be held on September 19, has now been deferred to the first week of October. The deferment comes in the backdrop of the ongoing tussle between the Centre and states over the pending compensation issue.
Several Opposition-ruled states have not agreed with the options provided by the Centre asking them to borrow to bridge the compensation gap of Rs 2.35 lakh crore for this fiscal.
The central government had last month decided that the 41st and 42nd meetings of the Council would be held on August 27 and September 19, respectively. Officials said the 42nd meeting has been postponed since Parliament would be in session.
In the previous Council meeting on August 27, the Centre proposed two options to states: to either borrow Rs 97,000 crore (shortfall only on account of GST implementation) from a special window facilitated by the Reserve Bank of India or borrow the complete shortfall of Rs 2.35 lakh crore (including Rs 1.38 lakh crore shortfall due to Covid-19 pandemic) from the market.
Gujarat, Bihar, Madhya Pradesh, Karnataka, Tripura, Goa are learnt to have opted for option 1 which entails borrowing Rs 97,000 crore, while northeastern states of Sikkim and Manipur have opted for the second option to borrow Rs 2.35 lakh crore.
Non-BJP ruled states such as Kerala, Punjab, Puducherry, Tamil Nadu, Delhi, Chhattisgarh have stated that both the options are not acceptable to them. They are expected to voice their concerns about the borrowing options, with some insisting that the Centre should borrow to meet the compensation deficit. The states have also raised concerns that the distinction of revenue loss for GST implementation and Covid-19 pandemic was unconstitutional.
The Centre has, however, said that it is unlikely to borrow given the impact it would have on yields of its government securities and also indicated that since the repayment has to be made from compensation cess receipts, it cannot borrow since cess is a resource dedicated to states.
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