West Bengal accepts GST borrowing option

West Bengal on Friday accepted the Centre’s borrowing choice of Rs 1.1 lakh crore to satisfy the Goods and Services Tax (GST) shortfall in 2020-21 after the Union authorities agreed to borrow on behalf of states, two officers stated, including that the state has known as for a gathering of the GST Council to resolve on borrowing the remaining Rs 72,000 crore.

West Bengal finance minister Amit Mitra despatched a letter to Union finance minister Nirmala Sitharaman on Friday, giving particulars why the state has accepted the primary choice and why the Centre ought to borrow the remaining shortfall within the present monetary yr, the officers stated on situation of anonymity.

Cash-strapped West Bengal is the 26th state to just accept the Centre’s borrowing proposal, shut on the heels of Congress-ruled Rajasthan, which diminished the variety of dissenting states to 5 — Chhattisgarh, Jharkhand, Kerala, Punjab and Telangana.

“Considering the acute physical stress on State finances due to Covid-19 pandemic and the Amphan cyclone, West Bengal is willing to go along with your new proposal under which the GoI (Government of India) has agreed to borrow two-thirds of the possible shortfall (Rs 1.1 lakh crore) and transfer the same to the States on a back-to-back basis, instead of asking the States to borrow, as was proposed by the GoI earlier in ‘Option 1’,” Mitra stated within the letter to Sitharaman. HT reviewed a replica of the letter.

Mitra stated it’s prudent on a part of the Central authorities to lastly settle for request of the states to borrow on their behalf and repair the debt from the compensation fund. “May I point out that the GoI has been able to borrow the initial compensation funds from the Special Window of RBI (Reserve Bank of India) at a low rate of 5% approximately, whereas, the interest rate paid by the States to for competitively borrowing from RBI auction is as high as 6.8%,” he stated within the letter.

At the 41st GST Council assembly on August 27, the Union authorities gave two borrowing choices to states to satisfy their income shortfall of about Rs 2.35 lakh crore within the present monetary yr.

Two days later, it specified that beneath the primary choice, states wouldn’t need to pay both precept or curiosity in the event that they borrow solely Rs 97,000 crore (later this quantity was raised to Rs 1.1 lakh crore) to satisfy the GST income shortfall due to implementation points. However, they must bear vital curiosity prices in the event that they select the lager borrowing choice of Rs 2.35 lakh crore that included income shortfalls resulting from an ‘Act of God’, which is the Covid-19 pandemic.

Initially 10 states – principally administered by non-National Democratic Alliance (NDA) events — objected and insisted that the complete borrowing must be carried out by the Centre with out imposing any direct curiosity burden on states. They had been Chhattisgarh, Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal.

Later, Maharashtra accepted the Centre’s borrowing plan, adopted by Tamil Nadu and Delhi. This month, Rajasthan additionally accepted the identical choice, the officers talked about above stated.

The Kerala authorities, which was initially exploring authorized choice, later softened its stand after Union finance minister Nirmala Sitharaman wrote to states on October 15 that the central authorities would borrow Rs 1.1 lakh crore from the market on behalf of states and go the identical as a mortgage to them. However, Kerala has not but formally accepted the Union authorities’s proposal because it insists that states must be totally compensated, officers stated.

In his letter to Sitharaman, Mitra additionally pressured on the necessity to totally compensate pandemic-hit states. “Needless to say, we sincerely urge you to borrow the remaining one third of potential shortfall (Rs 72,000 crores) as was suggested in GST Council meetings, in earlier letters and in conversations,” he stated.

The Union finance minister is the chairperson of the GST Council, the apex decision-making physique on the oblique tax. State finance ministers are members of the federal physique.

In his letter, Mitra requested the GST chairperson to convene assembly of the council on this matter.

“I also propose that you may consider convening a GST Council Meeting to discuss this matter of GoI borrowing the remaining one-third of the projected shortfall. And I am sure that we can reach a unanimous decision across States and the Central Government, thereby, upholding the highest standards of cooperative federalism,” he wrote.