Kerala calls off meeting to discuss legal options to resolve GST issue

The Kerala authorities on Saturday cancelled a gathering to debate authorized choices to resolve the Goods and Services Tax (GST) compensation cess challenge with the Centre, days after Union finance minister Nirmala Sitharaman clarified that the central authorities will borrow ₹1.1 lakh crore from the market on behalf of the states and go the identical as a mortgage to them.

HT reported on Saturday that with the Centre agreeing to borrow ₹1.1 lakh crore from a particular window of the Reserve Bank of India (RBI) and on-lend it to the states, a number of the seven states that disagreed to the preliminary plan might now signal on. Their fundamental concern was larger curiosity prices if particular person states approached market individually.

“Kerala’s CM puts away scheduled high level meeting to discuss approaching SC [Supreme Court] on GST issue, in the light of new initiative by Union FM. Having amicably settled question of who should borrow, we hope she will address question of how much to borrow through dialogue with state FMs,” Kerala finance minister Thomas Isaac tweeted Saturday.

A Union finance ministry official stated the Centre and the GST Council, the apex federal physique for the oblique tax, are open for discussions. “Members can raise any issue in the Council that would be discussed. But, stopping willing states from borrowing was not possible under Article 293,” the official stated, requesting anonymity.

Also Read: Jharkhand rejects Centre’s mortgage provide in lieu of GST compensation

On August 27, the Centre gave states the selection of borrowing ₹97,000 crore (the shortfall ensuing from GST implementation points) with out having to pay principal or curiosity or the whole ₹2.35 lakh crore income deficit from the tax projected for this fiscal 12 months. The ₹97,000-crore quantity was subsequently raised to ₹1.1 lakh crore on October 5. Some states objected and insisted the borrowing must be carried out by the Centre.

While 10 states initially opposed the plan, this quantity got here right down to seven by Wednesday, with some saying they might take into account authorized choices. The seven dissenting states are Chhattisgarh, Jharkhand, Kerala, Punjab, Rajasthan, Telangana and West Bengal. Puducherry earlier indicated its desire for the borrowing choice, however the Department of Expenditure was but to obtain a proper communication, the official stated.

The official stated that each one states would ultimately agree as there’s “no dispute” and the GST Council is dedicated to resolving “all differences”. “Borrowing of ₹1.1 lakh crore is in progress, which will help cash-strapped states. Meanwhile, GST collection is expected to improve in coming months. It will not only reduce the revenue shortfall, but also increase compensation cess collection. A review of financial position in the Council after the third quarter [December] could see significant reduction in the need for further borrowing. This is a dynamic situation and will be reviewed,” the official stated.

The GST Council is a federal physique, chaired by Union finance minister, and members embody finance ministers of the states. Until the current controversy, all its choices have been taken on the idea of a consensus.

Also Read: Dissenting states prone to settle for GST resolution

The Centre’s determination Thursday adopted by Sitharaman’s letter to states softened the stand of some dissenting states, a state authorities official stated on situation of anonymity.

Sitharaman wrote to the states: “I am also sensitive to the fact that States need to be protected from the adverse consequences of higher borrowing in the form of interest liability and addition to debt. Under Option-I the Government will arrange the borrowing in such a manner that cost will be at, or close to, interest rate of Union Government.”