Maharashtra government ‘unwillingly’ accepts option of borrowing ₹97,000 crore to make up for GST losses

Maharashtra, which had initially opposed both the options of borrowing to make up for the goods and services tax (GST) losses, has now intimated the Centre that

Maharashtra, which had initially opposed both the options of borrowing to make up for the goods and services tax (GST) losses, has now intimated the Centre that it will “unwillingly” go for the first option of raising loans equivalent to the actual losses, as officials said the state has no other alternative.

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Under the first option, the Centre had allowed states to borrow a collective amount of Rs97,000 crore, which is equivalent to the losses in revenue owing to the GST transition. During the 42nd meeting of the GST Council headed by Union finance minister Nirmala Sitharaman on Monday, the Centre increased the borrowing limit to Rs1.1 lakh crore from the earlier Rs97,000 crore, in the wake of the drop of about 3% in the growth rate.

During the meeting, the Maharashtra government informed the Centre that it will go for the first option. “We are not in favour of any of the options, and want the Centre to borrow on behalf of the states. But as no alternative is given to us, we will unwillingly go for the first option,” said an official from the finance department.

The state is expected to borrow more than Rs12,000 crore to make up to the compensation due from the Centre in the current fiscal.

During the 41st meeting of the Council on August 27, the Centre had proposed that the states could borrow Rs97,000 crore, which is equivalent to the revenue losses owing to the GST transition, or they could borrow Rs2.35 crore – equivalent to the revenue losses due to the GST transition and the Covid-19 pandemic situation. In the first option, the principal and interest would be paid from the cess fund, while in the second the states would bear the interest. Most of the states have opted for the first option.

The outstanding compensation expected from the Centre to Maharashtra has mounted to Rs30,000 crore between April and September. Maharashtra accounts for at least 11-12% of the total compensation paid to states and received the highest (Rs19,233 crore) compensation in 2019-20.