GST Council Meet- States Accuse Centre of 'Arm-twisting' Them to Borrow

Business Standard GST Council meet: States accuse Centre of 'arm-twisting' them to borrow

Even BJP-ruled states like Karnataka suggest central govt should borrow to compensate states.

Following a five-hour-long GST Council meeting on Thursday, states accused the Centre of ‘arm-twisting’ them to borrow, terming it a ‘betrayal of federalism’.

Despite being given seven days to examine the two options offered by the Centre, they turned those down minutes after the meeting concluded. Most states pressed for borrowing by the Centre to compensate them for the shortfall in collections.

During the meeting, the Centre gave the states the option to either borrow Rs 97,000 crore (shortfall according to the formula given under the law), or the entire Rs 2.35 trillion that accounts for the excess shortage in view of the Covid disruption.

T S Singh Deo, finance minister of Chhattisgarh, said states were being armtwisted to get the compensation, which was Constitutionally guaranteed to them. He questioned why the Centre wasn’t taking the loan, given there would be no repayment burden on states and the entire principle plus interest would be repaid through cess collection anyway.

“They are saying the entire principle and interest will be repaid using cess, which will continue after the five-year timeline. They agreed to raise our FRBM (fiscal responsibility and budget management) limit. If there is no financial burden, why can’t the Centre take the loan itself, instead of asking states and UTs to take it separately?” said Deo. Manish Sisodia, FM of Delhi, called the offer a ‘betrayal of federalism’. He said the option to avail of a loan from the RBI will not work for Delhi because it does not have the right to take a loan, as it is not a full state.