The Kerala government on Thursday termed as "unacceptable" the two options placed before the GST Council by the Centre for borrowing by states to meet the shortfall in tax revenues. Opposing the options for the Goods and Services Tax (GST) compensation proposed by the Union Finance Minister Nirmala Sitharaman, Kerala Finance Minister TM Thomas Isaac said in both options the states will have to sacrifice a part of the compensation.
He made it clear that full compensation was aconstitutional right of the states. "Full compensation is constitutional right of states. Unacceptable.#GSTCouncilMeet," Isaac said in a tweet on Thursday night. Earlier in the day, the Centre placed before the GSTCouncil two options for borrowing by states to meet theshortfall in GST revenues, pegged at Rs 2.35 lakh crore in thecurrent fiscal.
Briefing reporters after the 41st meeting of the GSTCouncil, Sitharaman said in New Delhi that the economy isfacing an extraordinary 'Act of God' situation, which mayresult in economic contraction. As per the Centre's calculation, the compensationrequirement by the states in the current fiscal would be Rsthree lakh crore, of which Rs 65,000 crore is expected to bemet from the cess levied in the GST regime. Hence, the totalshortfall is estimated at Rs 2.35 lakh crore.
Revenue Secretary Ajay Bhushan Pandey said of this, Rs97,000 crore is on account of GST shortfall, while the rest isdue to the impact of COVID-19 on the economy. Pandey said a special window can be provided to the states, in consultation with the RBI, at a reasonable interest rate for borrowing of Rs 97,000 crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
The second option before the states is to borrow theentire Rs 2.35 lakh crore shortfall under the special window. "States have been given seven days' time to think over theproposal," Pandey said.
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