Ahead of the crucial meeting of the Good and Services Tax (GST) Council on October 5, the Opposition-ruled states have dug in their heels against the Centre’s two borrowing options on GST shortfall compensation and are likely to take a common stand at the meeting.
The Opposition-ruled states of Punjab, Chhattisgarh, Jharkhand, West Bengal, Kerala, Delhi, Maharashtra, Puducherry and Telangana would reject the borrowing options and ask the Centre to activate the grievance redressal mechanism.
Chhattisgarh commercial tax (GST) minister TS Singhdeo told ET, “Our stance is what it was. The Centre should not take a majoritarian view but develop a consensus. This has been the spirit of the GST Council. There are a few states who do not understand why they should take responsibility for a shortfall. First, you took away our taxation rights and then you want us to take a loan to make good the GST compensation?”
Singhdeo said that there had been one interaction, organised by Kerala finance minister Dr TM Thomas Isaac where the Opposition-ruled states agreed that the options proposed by the Centre were unacceptable. “We would discuss more and formulate a strategy,” said Singhdeo.
The political controversy has been triggered by a GST revenue shortfall of Rs 2.35 lakh crore for the states. As per the GST Act, the Centre has to compensate for any GST losses. As per the Centre’s calculation, Rs 97,000 crore is on account of GST implementation and Rs 1.38 lakh crore is the impact of Covid on state revenues. Looking at Covid as an “act of God”, which is not defined under the Act, the Centre has proposed that the states borrow Rs 97,000 crore from a special window facilitated by the RBI or Rs 2.35 crore from the market.
Punjab finance minister Manpreet Badal questioned the Centre’s motive behind proposing states to take a loan. “It cannot be my word against theirs. There is a dispute resolution mechanism under the law. Why has the Centre been unwilling to activate it for three and a half years? This sets a wrong precedent for India,” Badal said adding Punjab would stick to its stand, rejecting the two borrowing options. “We do not know the math used by the finance ministry to reach these figures of Rs 97,000 crore and Rs 1.38 lakh crore. For us, this is a constitutional violation,” he said.
Trinamool Congress-ruled West Bengal has also rejected the two options with finance minister Amit Mitra terming the Centre’s stance as being “anti-federalist”. The Opposition-ruled states may informally discuss the issue on October 3. Jharkhand finance minister Rameshwar Oraon told ET, “There is no question of accepting the two options. The smaller states have a bigger problem of shortfall. We are likely to hold more discussions with other states and firm up a common stance on October 3.”
Singhdeo said that the states do not have a third option to propose to the Centre. “There is only one option which is, the government of India borrow the sum from the RBI, which has the best interest rates,” he said. The Opposition ruled states are hoping to get support from Tamil Nadu and Telangana governments as well.