GST: State welcomes offer, but wants to raise borrowing

Centre’s decision to borrow through a special window and provide back-to-back loans to States

Even while welcoming the Centre’s decision to borrow through a special window and provide back-to-back loans to the States in lieu of the Goods and Services Tax (GST) compensation, Kerala is putting pressure to borrow ₹1.70 lakh crore instead of the present offer of ₹1.1 lakh crore.

Kerala that had led the States to oppose the Centre’s twin options on GST compensation is of the view that the total shortfall in the collection of GST estimated at ₹2.35 lakh crore should be provided this year itself. Out of the shortfall ₹1.1 lakh crore is on account of GST shortfall and remaining ₹60,000 crore due to the pandemic.

Deferred payment

“We have welcomed the Centre’s offer to borrow ₹1.1 lakh crore. The Centre has climbed down. The remaining ₹60,000 crore will be given to the States only in 2023. This issue has to be resolved. The Centre should discuss with the States on how much of compensation is to be deferred to 2023. Let us negotiate this point and reach a consensus,” Finance Minister T.M. Thomas Isaac told The Hindu .

Union Finance Minister Nirmala Sitharaman who telephoned Chief Minister Pinarayi Vijayan on Friday from Delhi to drum up support for the Centre’s initiative was told that the State was welcoming the offer but wanted to enhance the borrowing to ₹1.7 lakh crore and about the benefits. Mr. Vijayan had also raised the demand in his reply to the letter written by Ms. Sitharaman later in the day.

Kerala which has been opposing the COVID-19 factor is putting pressure on the Finance Ministry to enhance the borrowing as it will not have any impact on the fiscal deficit of the government.

“Since under the new arrangement, the additional borrowing will not affect the fiscal deficit of the Centre, why is the Centre not ready to borrow ₹1.7 lakh crore instead of the present offer of ₹1.1 lakh crore,” asks Dr. Isaac.

State hopeful

The State is hopeful that the Centre will yield to the demand in view of the move to approach the Supreme Court on Centre’s arbitrary decision on the vexed issue as the GST council had not taken a decision after three meetings.

The Chief Minister has convened a meeting of the officials of the Finance and Law Departments on Saturday to discuss the issue. “We have only welcomed, but not accepted it,” Dr. Isaac said.