Finance Minister Nirmala Sitharaman on Monday said that no consensus had been arrived with the states on ways to make up for the shortfall in the Goods and Services Tax collection due to the coronavirus crisis.
She made the announcement after the Goods and Services Tax Council met to discuss the deadlock over the shortfall compensation.
The finance minister said that the Centre cannot afford to borrow at the present time. “Increased borrowed costs is not something we can afford at a time when India is looking at more money to invest and to borrow to do business,” she was was quoted as saying by ANI. “The impact would not be as severe if states were to borrow.”
Sitharaman assured the states that borrowing will not be a chaotic option and that the government will facilitate the process. She said that majority of the states had agreed to the option to borrow up to Rs 1.1 lakh crore from a special Reserve Bank of India-facilitated window.
As per the Centre’s estimates, the states’ GST revenue gap in 2020-’21 will amount to about Rs 3 lakh crore, while cess collections are only projected to reach Rs 65,000 crore, leaving a shortfall of Rs 2.35 lakh crore. At the 41st meeting of the GST Council, held on August 27, Sitharaman had called the crisis facing the states an unforeseen “act of God”, referring to the coronavirus pandemic.
The Centre had then on August 30 formally proposed two options for borrowings to meet the shortfall and given states seven days to choose one of them. The first option is to provide a special borrowing window to states, in consultation with the Reserve Bank of India, to provide Rs 97,000 crore at a reasonable interest rate. The other option is to meet the entire GST compensation gap of Rs 2.35 lakh crore this year itself after consulting the central bank.
However, some states like Kerala and Chhattisgarh rejected both options. On October 5, Sitharaman said 21 states had decided to take the first option. She also said it was untrue that the states which did not opt for either solution would be left to fend for themselves.
The finance minister had also announced that GST compensation cess worth Rs 20,000 crore will be disbursed to the states.