Five states that are not under the Bharatiya Janata Party (BJP) have rejected borrowing any money to tide over the GST revenue shortfall, as proposed by the central government in the Goods and Services Tax (GST) Council meeting on Thursday. The finance ministers of these states had a meeting where they unanimously decided to reject this move and write to the Prime Minister, as per a tweet by Chhattisgarh finance minister, T.S. Singh Deo.
The proposal by the central government
In the wake of the Coronavirus pandemic and the deteriorating economy, the current fiscal is also seeing a GST shortfall of Rs. 2.35 lakh crores. According to the government’s calculation, Rs. 97,000 crores are on account of GST implementation, and the rest is the influence of COVID-19 on the revenues of the state.
In the GST Council meeting on Thursday, the Centre had proposed two borrowing options to all the states: either to borrow the full amount of Rs. 2.35 lakh crores from the market or to borrow the deficit of Rs. 97,000 from a special window made by the Reserve Bank of India.
The finance ministers of five non-BJP ruled states had a meeting where they discussed that the GST Council meetings should be about debates and reaching a conclusion through consensus instead of the Centre pushing its agenda in a ‘majoritarian’ way, said Deo.
T.M. Thomas Isaac, the finance minister of Kerala, tweeted, “Now that we fully understand Centre’s intentions on GST compensation, we have no choice other than to reject them lock, stock, and barrel… No more surrender of states’ rights.” They also decided in the meeting that the Centre should not delegate its constitutional responsibility of meeting the revenue gaps to the states.
Letters to the Prime Minister
Arvind Kejriwal (Delhi), Bhupesh Baghel (Chhattisgarh), Edappadi K Palaniswami (Tamil Nadu), K Chandrasekhar Rao (Telangana), Mamata Banerjee (West Bengal), and Pinarayi Vijayan (Kerala) expressed their dissatisfaction over the borrowing policies in their letters to the Prime Minister (Bhupesh Baghel wrote to the Finance Minister).
Mamata Banerjee pointed out that the centre wants the states to borrow more money when most of them are unable to pay salaries to their employees. Chhattisgarh CM wrote, “You are well aware that as per constitutional provisions the Centre is accountable for providing GST compensation.”
Vijayan and Kejriwal also stressed the financial burden on the states and reminded the Centre of the constitutional rule, which says that “states would be assured of an annual compounded growth rate of 14 percent in GST revenue… during the initial five years.”
Opinion by the Policy Times
- One can be for or against a political party, but the country’s economy equally affects all. If your state borrows money from the market, you will also have to pay for it. Understand the policy and question your state and the centre.
- The opposing states are exercising their constitutional rights in accordance with the GST (Compensation to States) Act, 2017.
- The meetings regarding GST and finance should be open to discussion, rather than establishing rules that defy the constitutional laws.
- With the sharp contraction in GDP, India’s financial troubles have started, but it can still be balanced with suitable policies.