GST shortfall: Govt allows 20 states to borrow Rs 69,000 crore more

Dissenting states explore legal options, may move Supreme Court

GST, goods and service tax
Twenty states had picked the finance ministry’s first option of raising up to Rs 1.1 trillion to make up for revenue loss estimated on account of GST implementation alone

A day after the goods and services tax (GST) Council meeting ended in a deadlock, the Centre on Tuesday allowed 20 states to borrow an additional Rs 68,825 crore through the market to make up for the compensation shortfall amid inadequate cess collection.

Meanwhile, dissenting states like Kerala, West Bengal, Punjab and Chhattisgarh said they are exploring legal options, including moving the Supreme Court, to counter the Centre’s move.

Twenty states had picked the finance ministry’s first option of raising up to Rs 1.1 trillion to make up for revenue loss estimated on account of GST implementation alone, but not for losses due to the pandemic. Under this option, the entire principle and the interest will be repaid through compensation cess collection, which has been extended beyond June 2022.  

“Additional borrowing permission has been granted at 0.50 per cent of the gross state domestic product (GSDP) to those states that have opted for Option 1 out of the two options suggested by the Ministry of Finance to meet the shortfall,” said the official release.


The 20 states are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh, and Uttarakhand. All barring Andhra Pradesh and Maharashtra are ruled by Bharatiya Janata Party and its allies.

Chhattisgarh Finance Minister T S Singh Deo criticised the Centre for asking the 20 states to borrow from the market and not through the special Reserve Bank of India (RBI) window, as it had claimed. “What about government’s stated proposal that the Option 1 will be facilitated through the RBI window? These are completely ad-hoc decisions,” said Deo.  

Deo said the dissenting states will discuss options like not taking any loans at all or asking the Centre to provide loans to states under Article 293(2) of the Constitution. “The same article that they are quoting to prevent a voting on the subject provides for Centre to take loans and make it available to states,” he said.

A Kerala government official said moving the Supreme Court was the only option left. “The GST Council hasn’t decided on Option 1. We are consulting our law department. The Centre has destroyed the fabric of the GST Council,” the state official added.

West Bengal Finance Minister Amit Mitra said he was unsure what would be recorded in the minutes of the meeting as there was no conclusion and yet the Centre had taken a decision. “The 22 hours of discussion were illegitimate and infructuous,” he said.

Meanwhile, Bihar Deputy Chief Minister Sushil Modi said though the Rs 3,231 crore allocated for the state was not adequate, it will use the whole amount. “Though we required more, at least we got this much… They (dissenting states) wanted to veto it through voting. They may not require money, but we required it. They are playing games. When the FM has said that the states won’t be burdened on repayment of debt, why are you insisting that the Centre should borrow?”