No consensus on borrowing for shortfall in GST compensation cess, says FM

The GST Council meeting is underway. FM Nirmala Sitharaman is expected to address the media sooon

10:23 PM

GST Council meet ends without reaching consensus on compensating states

The stalemate over compensating states for the shortfall in GST collections continued on Monday with a meeting of the GST Council ending without reaching any consensus.

 

The panel, which is the highest decision-making body on indirect taxes, for the second time in a week failed to reach a consensus on the Centre's proposal of states borrowing against future GST collections to make up for the shortfall.

 

This was the third meeting in a row that discussed compensation shortfall without a decision.

 

Finance Minister Nirmala Sitharaman, who heads the Council, said the Centre cannot borrow and pay states for the shortfall as it would lead to rise in bond yields, resulting in rise in borrowing costs for the government and the private sector.

 

However, this would not be the case if states borrowed against future GST receipts, she said, adding 21 states had agreed to borrow as suggested by the Centre.

 

However, other states insisted on a decision to be taken by consensus, she said.

10:06 PM

Centre cannot borrow to make up for GST shortfall of states as it will lead to rise in borrowing cost: FM

10:06 PM

We will facilitate states in borrowing so that some states end up paying high-interest rates while others obtain loans at a reasonable rate: Finance Minister Nirmala Sitharaman

10:02 PM

GST Council can certainly take a call on cess, collection of cess, extending the period of collecting the cess and so on. That was repeatedly reiterated: FM Nirmala Sitharaman

9:56 PM

There is no dispute, these are just differences of opinion: FM Nirmala Sitharaman

9:54 PM

No consenus arrived on borrowing for shortfall in GST compensation cess, says FM Sitharaman

9:52 PM

Majority of the states had opted for option 1: FM Sitharaman

9:52 PM

Govt has already issued a borrowing calendar. If the centre borows, G-sec yields will go up, says FM Sitharaman

9:51 PM

Collection of cess inadequate for paying compensation, shortfall will have to be met by borrowing: FM Sitharaman

9:50 PM

Discussions in today's meeting went on the issue of borrowing, extension of cess and so on: Nirmala Sitharaman

9:10 PM

The central government cannot borrow, states will have to borrow: Finance Minister Sitharaman tells GST Council meeting, reports CNBC-TV18

9:09 PM

CNBC-TV18 reports that Finance Minister Sitharaman appeals states to take the central government's first option on GST compensation. The government has offered two solutions to states: borrow Rs 97,000 crore, which is the result of the shortfall owing to GST implementation, through the special window facilitated by the central bank, or borrow the full shortfall in compensation (Rs 2.35 trillion), which includes the impact of the Covid-19 pandemic, from the markets, to be facilitated by the central bank.

8:58 PM

There is no dispute (over GST compensation); only difference of opinion: FM Sitharaman tells GST Council meeting, reports CNBC-TV18

8:28 PM

The amounts will be paid by the compensation cess, which will extend beyond June 30, 2022. In the case of the second option, the proposed extension of cess will be used for paying only the principal, not the interest. The option of the special window was raised to Rs 1.1 trillion at the October 5 meeting.
 

Business Standard reported on Monday that at least 21 states and Union Territories that had agreed to the Centre’s options are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand, and Uttar Pradesh.
 

The Centre needs the support of 20 states to pass a resolution in the GST Council in case voting is required.

8:24 PM

Here is some background on the dispute. The central government offered two solutions to states: borrow Rs 97,000 crore, which is the result of the shortfall owing to GST implementation, through the special window facilitated by the central bank, or borrow the full shortfall in compensation (Rs 2.35 trillion), which includes the impact of the Covid-19 pandemic, from the markets, to be facilitated by the central bank.

7:13 PM

1:39 PM

Finance Minister Nirmala Sitharaman addresses media

1:31 PM

Indications are that savings of govt. and organized sector employees have increased, we want to incentivize such people to boost demand for the benefit of the less fortunate

- Finance Minister @nsitharaman, presenting LTC Cash Voucher Scheme to stimulate consumer spending pic.twitter.com/XDLzUisi3r

— PIB in Maharashtra

1:24 PM

Govt to give Rs 12,000 cr interest-free 50-year loan to states for capital projects as part of plan to boost economic activities, says FM

1:19 PM

Interest free 50-yr loans offered to states. Split in three parts

Part 1: Rs 1,600 cr for NE states and Rs 900 cr for Uttarakhand and Himachal (total Rs 2,500)

Part 2: Rs 7,500 cr for other states in proportion to share in Finance Commission devolution 50% initially (to be spent by March 31, 2021)

Balance after use of first investment

Unutilised funds to be reallocated
 

Part 3: Rs 2,000 cr for states which meet at least 3 out of 4 reforms given in Atma Nirbhar fiscal deficit package

1:15 PM

FM Sitharaman LIVE: Special Festival Advance can lead to additional consumer demand to the tune of Rs 8,000 cr

1:10 PM

Govt to give Rs 10,000 special festival advance all its employees as one-time measure to stimulate demand in the economy: FM

1:03 PM

Finance Minister Nirmala Sitharaman: To stimulate demand, expenditure will be front-loaded

New schemes include LTC cash voucher scheme and special festival advance.

1:01 PM

To stimulate demand, expenditure will be front-loaded; new schemes include LTC cash voucher scheme and special festival advance: FM

12:57 PM

Rules of the LTC cash voucher scheme summarised

12:54 PM

Govt employees, other organised sector employees to get equivalent of their LTC even without travelling

Govt employees, other organised sector employees to get equivalent of their LTC even without travelling. They could use the allowance to make purchases of their choice. this will apply on purchase of goods that attract 12% GST or more.

12:53 PM

LIVE: LTC Cash Voucher Scheme

* Some initial indications show that savings have increased as in lockdown people couldn't spend.

 

* Govt employees get leave travel allowance in block of four years - one to anywhere in India and one hometown or two for home town. Air or rail fare will be reimbursed and leave encashment of 10 days will be paid to them: FM

12:51 PM

LIVE: Proposals being presented today can stimulate demand

Consumer Spending proposals have two components

LTC cash voucher scheme

Special festival advance scheme

12:48 PM

Savings have increased due to lockdown, says FM Sitharaman

12:46 PM

Supply constraints have eased, need to boost demand, says Nirmala Sitharaman