GST Council meet: No consensus arrived at among states, says Sitharaman
'There is no unanimity but that does not mean there is a dispute. (GST compensation) cess has been extended beyond five years,' says FM
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Business News/ News / India/ GST Council meet: No consensus arrived at among states, says Sitharaman
Centre and dissenting states on Monday failed to reconcile their differences over the Goods and Services Tax (GST) compensation issue in a dedicated meeting of the federal body held via video conferencing, at a time most states are starving for funds amid the coronavirus outbreak. However, finance minister Nirmala Sitharaman said the centre will facilitate 21 states who want to borrow to meeting gap in GST compensation.
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“There is no unanimity but that does not mean there is a dispute. (GST compensation) cess has been extended beyond five years. If (many) states are willing to borrow, we will facilitate. I don’t expect a dispute," Sitharaman said.
In the 41st meeting of the GST Council in August, the central government had given the states two borrowing options, one in which they can borrow ₹97,000 crore from the central bank through a special window which is attributable to GST implementation or raising the entire amount of revenue shortfall of ₹2.35 trillion from the market. The two options were subsequently revised to ₹1.1 trillion and ₹1.8 trillion respectively.
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Ten non-BJP ruled states including Kerala, West Bengal, Punjab and Delhi want the Centre to fully borrow the GST revenue shortfall amount and compensate states.
Clarifying why the centre is unwilling to borrow, Sitharaman said centre has issued a borrowing calendar and if it further revises it upward, it will immediately jack up the yields of government securities. “Borrowing cost will go up for states and even private sector. At a time we are seeking more money to invest, can we afford that? The impact will not be as much if states borrow. We will facilitate the borrowing in a manner so that some states don’t borrow at higher yields than some others," she added.
Sitharaman said majority of states have opted for the first option. “They have been asking for speedy release of money. Other states asked to decide on basis of consensus," she added.
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Thomas Isaac, the finance minister of Kerala, in an interview earlier this month, had said if the Centre presses to get the borrowing options cleared by vote and refuses to set up a dispute resolution mechanism, his state will move the Supreme Court.
In a tweet before the GST Council meeting started, West Bengal finance minister Amit Mitra said: “Today, will @nsitharaman (Nirmala Sitharaman) with Modi’s direction ignore and muzzle views of 10 states at GST Council, using brute majoritarianism? If she does, it will impart a death blow to cooperative federalism already on ventilator. Will today be marked a black day for India’s democracy?"
Earlier on the day, as part of a mini stimulus package, for state governments, Sitharaman announced an interest-free 50 year loan worth ₹12,000 crore for capital expenditure in FY21, including ₹2000 crore for those states which could meet three out of four reforms under the Atmanirbhar package such as one nation, one ration card, ease of doing business, power sector, urban local body reforms.
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Sitharaman said most states welcomed the move by centre. “I requested states to extend similar demand stimulus on LTC to give revival shot in the arms," she added.
After the meeting, Kerala finance minister Thomas Isaac tweeted:
"It is unfortunate that Union FM does not propose a decision in the Council or even make a statement what she is going to do but choose to make the announcement in the press conference. Why does Centre refuse to take a decision in Council? Total disregard for democratic norms."
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