Monday, July 26, 2021
Home Business Delhi FM Sisodia along with the FMs of other states discussed viable...

Delhi FM Sisodia along with the FMs of other states discussed viable options to account for the shortfall in the economy suffered due to the COVID-19


NEW DELHI : Finance Minister of Delhi, Shri Manish Sisodia attended a meeting today with the Finance Ministers of West Bengal, Punjab, Chhattisgarh, Kerala, and Telangana. The meeting was held in reference to the GST council meeting convened by the Finance Minister of India on August 27. Reiterating his stand against the options given by the GOI, Shri Manish Sisodia discussed viable options with the finance ministers of other states regarding the shortfall in the economy due to the COVID-19 outbreak.
Consequent to the GST Council meeting held on 27th August 2020, the Ministry of Finance, Government of India circulated GST compensation options through an arbitrary division of shortfall arising out of GST implementation and shortfall arising out on account of COVID pandemic.
As per the Ministry of Finance estimates the total shortfall for the year 2020-21 is expected to be around Rs.2.3 lakh crore, out of which Rs.96,477 crore is on account of implementation of GST and the remaining on account of COVID-19.
Under Option-I:-
I. The shortfall arising out of GST implementation (calculated at Rs.97,000 crores approximately) will be borrowed by States through the issue of debt under a Special Window coordinated by the Ministry of Finance.
II. The interest on the borrowing under the Special Window will be paid from the Cess as and when it arises until the end of the transition period.  After the transition period, principal and interest will also be paid from the proceeds of the Cess, by extending the Cess beyond the transition period for such period as may be required.  The State will not be required to service the debt or to repay it from any other source.
III. The borrowing under the Special Window will not be treated as a debt of the State for any norms which may be prescribed by the Finance Commission etc.
Under Option-II:-
I. The entire shortfall of Rs.2,35,000 crores (including the COVID-impact portion) may be borrowed by States through the issue of market debt.  The GOI will issue an OM committing to the repayment of the principal on such debt from Cess.
II. The interest shall be paid by the States from their resources.
To elaborate on the options provided by the Government of India and to arrive at a considered opinion on this complicated issue, Finance Ministers of West Bengal, Punjab, Chhattisgarh, Kerala, Telangana, and Delhi had a detailed discussion through Video Conference this afternoon and unanimously decided to reject both the options given by the Government of India since these options are against the letter and spirit of the GST Compensation Act and the Constitution (101st Amendment) Act.
These States resolved that the following is the only legally tenable option during this critical situation:-
1. The entire estimated shortfall of Rs.2,35,000 crores in the compensation cess fund may be borrowed by the Government of India through RBI/any other suitable mechanism.
2. The repayment of the principal and the interest liability should start w.e.f. 2022 and should be entirely serviced out of the receipt from the cess for which the GST Council should extend the period of levy of cess beyond 5 years or till the time it is required to repay the debt.
3. This will obviate the need for borrowing by individual States, which has complications in terms of the borrowing capacities of the State, and also differential interest rates for different States especially in Option No.2.  This will also be a clean mechanism as the entire borrowing has to be routed through the “Goods and Services Tax Compensation Fund as mandated by Section 10 of the Goods and Services Tax (Compensation to States) Act, 2017.”
4. GST Council to authorize the Government of India to borrow the said amount and to make suitable amendments in the Goods and Services Tax (Compensation to States) Act, 2017 to extend the levy and collection of Cess under the Goods and Services Tax (Compensation to States) Act, 2017 for the purpose of meeting the repayment liabilities arising out of the borrowing by the Government of India.
5. Under this option, the Central Government will also not be required to make the relaxations in the borrowing limits of the State and or provide for special borrowing permissions in respect of States/Union Territories.
The Finance Ministers agreed to take up the above as the only viable option before the Nation and the same will be brought before the GST Council.

Most Popular

close