Former Congress chief Rahul Gandhi on Monday took a swipe at state governments, especially those ruled by the Bharatiya Janata Party, that have agreed to the Centre’s borrowing proposal to make up for the loss of revenue on account of the Goods and Services Tax implementation.

His comments came after the GST Council meeting failed to reach an agreement with states and Union Territories on the borrowing options made available. Monday’s meeting was the second one in a week and the third overall to resolve the standoff between Opposition-ruled states and the government. Finance Minister Nirmala Sitharaman, however, said the Centre is ready to help the states who have decided to borrow from the markets on their own account to bridge the cess shortfall.

Gandhi tweeted: “1. Centre promises GST revenue for states. 2. Economy shattered by PM and Covid. 3. PM gives [Rs] 1.4 lakh crores tax cuts to corporates, buys 2 planes for himself for [Rs] 8,400 crores. 4. Centre has no money to pay states 5. FM tells states – borrow. Why is your CM mortgaging your future for Modi?”

GST compensation

On August 27, Finance Minister Nirmala Sitharaman at the GST Council meeting had said that the crisis facing the states is an unforeseen “act of God”, referring to the coronavirus pandemic. The Centre offered two options for borrowing by states to meet the shortfall. As per its 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.

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 borrow Rs 2.35 lakh crore from market. Following demand by some state governments, the amount of Rs 97,000 crore was increased to Rs 1.10 lakh crore, according to PTI.

However, 10 Opposition-ruled states have said that the Centre must borrow instead of its push for the states to do so. As many as 21 states – which are mostly BJP-ruled or have supported it on various matters – have opted to borrow Rs 1.10 lakh crore to meet the compensation shortfall.

Kerala Finance Minister Thomas Isaac said Sitharaman’s announcement on allowing 21 states to borrow is illegal. “Option one involves deferment of compensation payment beyond five years for which a council decision is necessary as per the attorney general’s opinion,” he tweeted after the meeting. “No such decision has been made in the council.”

Meanwhile, Punjab Finance Minister Manpreet Singh Badal said that 10 opposing states had asked for a dispute resolution mechanism and formation of a group of ministers to resolve the row, but there was no agreement at the meeting.