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Opposition states plan to seek Prime Minister Modi’s help on GST shortfall compensation

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NEW DELHI: Opposition-ruled states will seek Prime Minister Narendra Modi’s intervention on the issue of the goods and service tax shortfall compensation, unhappy with the Centre’s offer of two borrowing options.

Andhra Pradesh, Tamil Nadu and Odisha are likely to join Delhi, Punjab, Kerala, West Bengal, Chhattisgarh, Jharkhand, Maharashtra, Rajasthan and Puducherry in rejecting the options and asking the Centre instead to borrow and compensate the states.

“At least a dozen chief ministers will write to the Prime Minister individually… Kerala will be sending a letter tomorrow,” Kerala finance minister Thomas Isaac told ET after the opposition-led and allied states met via videoconferencing and collectively decided they will not borrow.

“Andhra Pradesh, Tamil Nadu and Odisha had taken strong position in the Council (opposing the proposals) … we hope they would also join,” he added.

GST2

The states will hold further talks after meeting the finance secretary and expenditure secretary on Tuesday to clarify the Centre’s offers.

One of the options offered on Thursday was for the states to borrow Rs 97,000 crore from a special central bank facility to make up the shortfall due to the transition to the GST regime, with repayment of the principal and interest to be serviced by the compensation cess.

The alternative is to borrow Rs 2.35 lakh crore, the estimated shortfall on account of the GST transition and the Covid-19 induced slowdown, from the market, facilitated by the Centre and RBI.

However, the states would bear the interest burden while the principal would be serviced by the compensation cess, which is levied on sin and luxury products such as cigarettes and specified categories of automobiles.

Tamil Nadu chief minister Edappadi K Palaniswami wrote to the PM on Monday, asking him to direct the finance ministry to revisit its stance on GST compensation.

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