Opposition ruled states like Punjab on Thursday said the options given by Centre to borrow funds to meet GST revenue shortfall are not acceptable.
However, Bihar Deputy Chief Minister Sushil Modi said since borrowing would be funded from cess collected beyond five years, which is beginning 2022-23 fiscal, there would be no burden on state exchequer for repayment of either principal or interest component of the loan.
As per the Centre’s calculations, the compensation requirement of states in current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore would come from levy of cess.
Out of the shortfall of Rs 2.35 lakh crore, the shortfall due to GST implementation is Rs 97,000 crore and the remaining is due to COVID-19 impact.
The Centre has given two options to states — to either borrow the entire Rs 2.35 lakh crore or borrow only Rs 97,000 crore through a special window, which would be provided by the RBI, to meet the revenue shortfall.
Punjab Finance Minister Manpreet Singh Badal said the solution provided by the Centre is not acceptable to the state.
“The solution was thrust upon us. The amount will be repaid from the compensation cess which will continue for 2-3 more years. This is not acceptable to Punjab,” Badal said, adding that the compensation amount due to the state is Rs 6,500 crore for April-July.
He said 25 per cent of state’s tax base was subsumed in GST because there was assurance from the Centre on compensation.
“It is one thing to say that there is no funds, but it is another thing to say that there is no commitment to provide compensation for revenue loss,” Badal said.
Kerala Finance Minister Thomas Isaac tweeted, “The attempt of Centre to introduce a distinction in revenue shortfall as due to implementation of GST and as that caused by Covid and that latter doesn’t deserve to compensated fully is not constitutionally valid. Constitution makes no such distinction”.
Delhi’s Deputy Chief Minister Manish Sisodia said under the existing administrative set up, the Delhi government cannot take a loan from the RBI, and the Centre should do so to meet the Rs 21,000 crore deficit.
“The Centre had promised that it will pay GST compensation at the rate of 14 per cent for five years, in case of revenue shortfall, to the states. But today in the GST Council, the Centre refused it, saying there was no provision for compensation in situations like a pandemic,” he said.
The states will be given a detailed plan for the two options by the Centre, following which they will get back with their view.
Modi, who also holds the finance portfolio in Bihar, said there would be no scope of defaulting on loan since repayment is guaranteed from levy of cess.
“In the options provided, the concerns of states will be taken care of as their exchequer will not get burdened. We welcome this options,” he said.
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