21 states settle for Rs 97,000 crore borrowing proposal to satisfy GST shortfall

New Delhi, September 20

As many as 21 states, largely dominated by BJP or events which have supported it on numerous points, have opted to borrow Rs 97,000 crore to satisfy the GST income shortfall within the present fiscal, sources mentioned on Sunday.

The states and union territories (UTs) which have intimated their resolution to the Centre are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand and Uttar Pradesh.

Finance Ministry sources mentioned Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal are but to reply to the GST Council proposal to resolve their choices.

The states which don’t submit their borrowing choices earlier than the due GST Council meet on October 5, 2020 should wait until June 2022 to get their compensation dues, topic to the situation that the GST Council extends the cess assortment interval past 2022, the sources mentioned.

GST Council with full presence of states and UTs wants, as per the GST Act, solely 20 states to cross any decision, in case voting is required on any difficulty, the sources added.

In the present fiscal, the states are observing a staggering Rs 2.35 lakh crore Goods and Services Tax (GST) income shortfall.

Of this, as per Centre’s calculation, shortfall of about Rs 97,000 crore is on account of GST implementation and relaxation Rs 1.38 lakh crore is as a result of impression of COVID-19 on states’ revenues.

The Centre late final month gave two choices to the states to borrow both Rs 97,000 crore from a particular window facilitated by the RBI or Rs 2.35 lakh crore from market, and has additionally proposed extending the compensation cess levied on luxurious, demerit and sin items past 2022 to repay the borrowing.

The sources mentioned few extra states are additionally to intimate their borrowing choice in a day or two.

They added that Manipur, which had earlier opted to borrow Rs 2.35 lakh crore, later modified its desire to the Rs 97,000 crore choice.

The non-BJP dominated states are at loggerheads with the Centre over the problem of funding shortfall.

The chief ministers of six non-BJP dominated states—West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu—have written to Centre opposing the choices that require states to borrow to satisfy the shortfall.

While these states need Centre to borrow to satisfy the shortfall, Centre has argued that the income accruing from GST compensation cess goes to the states and the Centre can’t borrow on the safety of the tax it doesn’t personal.

Under the GST construction, taxes are levied underneath 5, 12, 18 and 28 per cent slabs. On high of the best tax slab, a cess is levied on luxurious, sin and demerit items, and the proceeds from the identical are used to compensate states for any income loss.

The Attorney General for India KK Venugopal had given his authorized view on the compensation cess difficulty the place he has opined that there is no such thing as a obligation on the Centre underneath the GST legal guidelines to compensate for lack of income.

He had opined that the GST Council has to search out methods to satisfy any income shortfall arising out of GST implementation.

The fee of GST compensation to states turned a difficulty after income from imposition of cess began dwindling since August 2019. The Centre needed to dive into the surplus cess quantity collected throughout 2017-18 and 2018-19 to pay the states.

The Centre had launched over Rs 1.65 lakh crore in 2019-20 as GST compensation. However, the quantity of cess collected throughout 2019-20 was Rs 95,444 crore.

The compensation payout quantity was Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18.

During April-July of present fiscal, the entire compensation resulting from states stands at over Rs 1.51 lakh crore. PTI


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