A day after the Goods and Services Tax (GST) Council failed to arrive at a consensus on the deadlock between opposition-ruled states and the Centre for the compensation shortfall, the Centre on Tuesday gave its nod for 20 states to raise Rs 68,825 crore via open market borrowings to meet the GST revenue deficit.
The 20 states that have opted for Option 1 — borrowing through a special window facilitated by the Reserve Bank of India and Finance Ministry — include Andhra Pradesh, Maharashtra, Madhya Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Odisha, Sikkim, Uttar Pradesh, while eight states are yet to choose their option.
“Additional borrowing permission has been granted at the rate of 0.50 per cent of the Gross State Domestic Product (GSDP) to those States who have opted for Option-1 out of the two options suggested by the Ministry of Finance to meet the shortfall arising out of GST implementation,” the Finance Ministry said.
Opposition-ruled states had objected to the process, which could see a legal challenge going ahead. Chhattisgarh Commercial Taxes Minister TS Singh Deo said the Centre has let down the states and that the Government of India should take a loan which will be serviced fully by GST Compensation Cess Fund.
“Everyone who respects our federal structure should come together & stand with rights of the state to receive their Constitutional & Legal dues. The Central Govt has let down the States in this hour of need and has failed to perform it’s solemn Constitutional and Legal Obligations,” he posted on Twitter.
Kerala Finance Minister Thomas Isaac had said Monday that the announcement that 21 states will be allowed to choose Option 1 is “illegal”. “Option one involves deferment of compensation payment beyond 5 years for which a Council decision is necessary as per AG’s opinion. No such decision has been made in the Council,” Isaac had posted on Twitter.
A top government source said that “no consensus does not mean no decision” and the states that want to go ahead to opt for the borrowing option are being allowed, while the dissenting states will be paid compensation out of cess collections as and when resources are generated.
“We will fill the gap (in compensation shortfall) as and when we can fill it. We will facilitate opposing states as and when they approach us,” sources in the central government said.
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