NEW DELHI: On Monday, the GST Council failed to reach any unity overcompensating states for the shortfall in GST collection. This happened for the second in a week and was a continuation of the 42nd GST Council meeting.
During the meeting, the Finance Minister Nirmala Sitharaman informed that the Centre could not borrow and pay States. “The States need to borrow. This would lead to a rise in bond yields,” added Sitharaman. She further informed that the rule would not be applicable if the states would borrow against future GST receipts. “21 States have already agreed to borrow,” she added.
Reportedly, the Centre has issued a borrowing calendar and no one could go behind the dates. If any individual goes beyond the G-Sec deals which are used as a benchmark, then it would result in an escalation of borrowing costs for States and the private sector. “Increased borrowed costs is not something we can afford at a time when India is looking at more money to invest and to borrow to do business,” Sitharaman commented.
Previously in August, the Centre had given two options to the states. Firstly, to borrow either Rs 97,000 crore from a special window facilitated by the RBI or Rs 2.35 lakh crore from the market. It had also proposed extending the compensation cess levied on luxury, demerit, and sin goods beyond 2022 to repay the borrowing.