Economy

GST Council heads to stormy session on Monday with no consensus on the borrowing plan

Our Bureau. New Delhi | Updated on October 04, 2020 Published on October 04, 2020

The States are staring at a ₹2.35 lakh crore GST revenue shortfall

Monday’s GST Council meeting is expected to be stormy, with no unanimity yet on the compensation shortfall.

Many expect even a voting to decide on the way the compensation shortfall is to be met. If voting happens, it will be the second time in the journey of the GST Council — the first was on December 18, 2019, for a decision on the tax rate for lotteries.

To meet the shortfall in compensation due to them, the Centre has offered States and Union Territories with legislatures, two borrowing options. They could either raise ₹97,000 crore from a special window facilitated by the RBI or borrow ₹2.35-lakh crore from the market. The Centre also proposes to extend the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.

 

The Centre has claimed that 21 States/UTs had opted for the first option. However, barring Odisha and Andhra Pradesh, non-BJP ruled States such as West Bengal, Punjab, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu have opposed the entire plan and sought an alternative mechanism. Some, such as Punjab, want a dispute resolution mechanism also set up.

In case the Council members are unable to reach a consensus, the last option would be voting. In such a case, the Centre appears to be on a safe wicket, thanks to the law.

Quorum pattern

The States and UTs together have 66.6 per cent weightage, while the Centre has 33.3 per cent. For any decision to be cleared, at least 75 per cent of the weighted votes is required.

Each of the 28 States and 3 UTs with legislature has a voting weightage of 2.15 per cent. Even if 19 States and one UT (J&K) support borrowing, it will add up to 43 per cent. Combined with the Centre’s weightage, it will rise to 76.33 per cent, comfortably beyond the required threshold.

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Published on October 04, 2020
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