Extending support to flood-ravaged Kerala, the Centre has proposed that the Goods and Services Tax (GST) Council should explore the possibility of a national cess to help the state find resources to rebuild its infrastructure, Kerala Finance Minister Thomas Isaac told The Indian Express.
The Centre will also tweak rules to allow the state to borrow beyond the mandated limit, Isaac said. “The Union Finance Minister said that the GST Council should explore the possibility of an all-India cess to help states like Kerala in times of need. It will be discussed in the GST Council. This will be for a stipulated period…all states will contribute,” he said.
Isaac said he was informed during a meeting Thursday with Union Finance Minister Arun Jaitley — the first after the state was hit by floods — about the “problems” in changing GST laws to permit the state to levy a cess for mobilising resources, as it had demanded earlier.
“He (Jaitley) pointed out that there are two problems. One, a cess for a particular state goes against the principle of a single tax. Also, the present software may not accommodate such a cess,” Isaac said.
Describing their meeting as “fruitful and cordial”, Isaac said Jaitley agreed “in principle” to allow Kerala to borrow beyond its limit during the process of reconstruction. “He has been mediating discussions on borrowing from World Bank and ADB, as well as other international agencies. The key issue is whether additional borrowing should be above the normal borrowing of the state. No state has been given permission for it,” Isaac said.
“But the Finance Minister was very positive that a means should be formed to give special accommodation to states in crisis. He did not give the nod for a radical increase in borrowing limit because there is no time to spend, either. It can be tweaked in the future, of course… How it can be done will be discussed later,” Isaac said.
With Kerala looking at more fund-raising channels for reconstruction and rehabilitation, it has asked the Centre to increase its market borrowing limit from 3 per cent of Gross State Domestic Product to 4.5 per cent. However, there is no such precedent for a state that has been affected by a natural disaster.
In his 2018-19 budget, Isaac had said that Kerala’s GSDP was estimated to be Rs 7.72 trillion — on this basis, the state can only borrow up to Rs 231 billion.
However, Isaac said the issue of accepting foreign aid, which became a controversy after Kerala Chief Minister Pinarayi Vijayan stated that UAE had offered Rs 700 crore, was not discussed. “The issue of accepting or rerouting foreign aid was not discussed today. The Kerala government and the Ministry of External Affairs will discuss it later. The stalemate continues on it,” Isaac said.
The state government, which has appointed KPMG to “projectise” its ideas for rehabilitation and reconstruction, has calculated it would need Rs 30,000 crore to rebuild — Rs 20,000 crore for capital expenditure and Rs 10,000 crore for revenue expenditure. Isaac said the Rs 20,000 crore includes investment for reconstruction of roads, canals and protecting sea walls.
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