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Key GST Council meet today, 9 states yet to pick borrowing option
So far, 21 state governments have opted to borrow Rs. 97,000 crore to plug a shortfall in revenue from the GST rather than borrow the entire deficit of Rs. 2.35 lakh crore.
The Goods and Services Tax (GST) Council meeting on Monday to finalise modalities to compensate states for their revenue shortfall of Rs 2.35 lakh crore in the current financial year is expected to be stormy as opposition-ruled states - Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal - have not yet opted either of the two borrowing options, two officials aware of the development said on Sunday.
So far, 21 state governments have opted to borrow Rs. 97,000 crore to plug a shortfall in revenue from the GST rather than borrow the entire deficit of Rs. 2.35 lakh crore, the officials said requesting anonymity.
The government has projected a Rs. 2.35 lakh crore shortfall in GST revenue this financial year, Rs. 97,000 crore accruing from implementation issues and the rest from the pandemic, and prompted the states to borrow from the market to cover the deficit.
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At the 41st GST Council on August 27, the Union government gave two borrowing options to the states to meet the revenue shortfall - the states would not have to pay either the principal or the interest if they borrow only Rs 97,000 crore to meet the GST revenue gap because of implementation issues, but they would have to bear significant interest costs if they choose the larger borrowing option of Rs 2.35 lakh crore that includes revenue shortfalls due to an ‘Act of God’ - the Covid-19 pandemic.
Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand and Uttar Pradesh have so far, opted for the first borrowing option of Rs 97,000 crore, officials said.
“A final decision on this matter is expected on Monday at the 42nd meeting of the GST Council. It is for the members to work out a legal and viable solution to this crisis. No outside agency can interfere in the Council’s decision-making process,” one of the officials said.
The proposal to form a dispute resolution mechanism had been already rejected, he said, adding that some council members could raise this matter on Monday.
A second official said, “A proposal to create a dispute settlement authority consisting of retired judges was mooted in 2011, even before the implementation of GST regime, but it was rejected by the then Parliamentary Standing Committee. Later, the then GST Empowered Committee headed by Sushil Modi also rejected the proposal arguing that any such authority would undermine the sovereignty of the GST Council which essentially consists of the Centre and states and whose recommendations are binding on state legislatures and the Parliament.”
Apart from the Fitment Committee and the Law Committee, the Council can form groups of ministers (GoMs) and committees of officers (CoOs) to resolve any matter, he said. “Therefore, to say that the GST Council has not set up any dispute resolution mechanism is without any basis,” he added.
