Impasse persists in GST Council assembly

Tribune News Service

New Delhi, October 12

A second GST Council meeting in a week failed to break the deadlock between Opposition-ruled states and the Centre to meet the shortfall in compensation cess. The situation did not deteriorate to a voting after some state Finance Ministers warned that unilateralism could work both ways.

At the fag end of the meeting on Monday, Union Finance Minister Nirmala Sitharaman appealed to opposition-ruled states to show a large heart, and take the first option. She indicated that it could be sweetened further with more discussions.

The flag against attempts to impose the first option was raised by Punjab Finance Minister Manpreet Badal who said it would not be right for the Centre to impose its will. The shortfall should only be made good by the Centre replenishing the Compensation Fund instead of asking states to borrow, he asserted.

The Centre repeatedly emphasised the point that 21 states and UTs have already accepted the first option and that as per Constitutional provisions, the GST Council does not have the jurisdiction to approve the borrowing plan of states. It has to be decided by states and the expenditure department.

The two borrowing options given by the Centre to the states at an earlier GST meeting included one calculating GST related shortfall in revenue at Rs 1.10 lakh crore, which states should borrow from the RBI under a special dispensation. This borrowing will not be counted from any of the states’ existing borrowings and its entire interest and principal would be settled through compensation cess, including the levy in the extended period.  

The second option gives the states’ plan to borrow the entire expected shortfall of Rs 2,35,000 crore this year and this borrowing will only be paid back to states during the extended period of GST compensation cess levy.

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