GST dues: With a day to go, States yet to pick borrowing option

Shishir Sinha New Delhi | Updated on September 06, 2020 Published on September 06, 2020

With just a day left for States to pick an option to meet the GST compensation shortfall, a consensus choice remains elusive.

Tuesday, September 8, is the last day for States to indicate their preferred option — borrow ₹97,000 crore through the RBI’s special window or raise₹2.35-lakh crore through the open market. There is no change in the Centre’s stand.

“It is not possible to go for additional borrowing over and above the ₹12-lakh crore (Budgetary Estimate of borrowing), as proposed (by some of the State),” a senior government official told BusinessLine.

“States favouring either of the option will be required to prepare a formal proposal, get consent from the Centre under the Fiscal Responsibility and Budget Management Act and go for borrowing as prescribed,” the official said. Those who are opting for neither proposal will have to wait for a political solution, he added.


NDA-ruled States such as Karnataka, Bihar and Assam have made a choice while Opposition-ruled States/UTs such as Tamil Nadu, West Bengal, Kerala and Delhi have rejected both the options — they want the Centre to borrow in their stead.

Dispute resolution

Some of these States are also pitching for a ‘dispute resolution mechanism’ to be operationalised.

“Since there is nothing like a ‘one nation-one option kind’ of thing, there is no need to get approval for an individual State’s choice in the GST Council,” said the official. The borrowing requirement of each State is discussed and approved individually with the Centre. However, as the Centre prefers all States/UTs taking one option, the official said the GST Council meeting of September 19 may discuss the overall issue, which is likely to make it a stormy event.

The pandemic has affected businesses, in turn pinching the GST mop-up. The shortfall is estimated at ₹3-lakh crore. As the Centre expects ₹65,000 crore to be collected through the Compensation Cess, there is a big question on the remaining ₹2.35-lakh crore.

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Published on September 06, 2020
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