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States which don't choose the Centre's borrowing options may not get GST dues till June 2022

Saransh Pandey

  • September 21, 2020
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    Any state that does not choose one of the borrowing options offered by the Centre will have to wait till June 2022 to get compensation for the revenue loss on account of GST transition

According to a senior government official, the states which want compensation for the revenue loss on account of goods and services tax (GST) transition and if they do not choose one of the borrowing options offered by the Centre then they have to wait till June 2022 to get compensation. Currently, 21 states have agreed with the first option, entailing Rs. 97,000 crores borrowing, which is a sufficient number needed to pass a resolution in the GST Council if it is put to vote. This will in turn put pressure on the Opposition-ruled states, which have rejected both the options.  

The other states which do not submit their options before the due GST Council meet, then they will have to wait till June 2022 to get their compensation dues on the condition that the GST Council extends the cess collection period beyond 2022. During a specially convened Council meeting on August 27 Centre had offered two borrowing options to the states. 

In the first option, the borrowing amount will be equivalent to revenue loss estimated on account of GST transition that can be borrowed from a special central bank facility. Principal and interest in the first option are to be serviced by the compensation cess. In the second option, states will have to borrow Rs 2.35 lakh crore from the market, facilitated by the Centre and RBI, entailing revenue loss due to GST transition as also Covid-19 induced slowdown but in this, the states would have to bear the interest burden. 

However, the opposition-led states of Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal are against both options and are looking forward towards the Prime Minister’s intervention. Over Rs, 1.5 lakh crore as GST compensation is pending towards states for the period April-July, 2020, as the cess collected in the current financial year was insufficient to pay the dues. 

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