GST compensation shortfall: Kerala may take Option 1 under protest

Kerala may become the third of the dissenting states to take up the Rs 1.1 lakh crore borrowing option, after initially rejecting both options of the Centre for meeting goods and service (GST) compensation shortfall.

Finance minister Thomas Isaac told ET that the state may also accept the borrowing option under protest if the co-ordinated effort of the states does not proceed further, as funds were needed to run the government.

“If there’s no other option then we will also accept, but under protest and we will continue to raise the issue at the GST Council… There was to be a co-ordinated action but Kerala is still waiting for it,” he said, adding that the state government cannot be indefinitely denied of revenue.

Opposition led states were supposed to meet after the October 5 GST Council meeting to determine a collective approach against the Centre’s borrowing options, but no such meeting has taken place since.

Chhattisgarh, West Bengal and Punjab that had declined both options are also rethinking their strategies after two of the dissenting states – Rajasthan and Puducherry – took the Rs 1.1 lakh crore option this week.

TS Singh Deo, commercial tax minister of Chhattisgarh said that states were consulting among themselves to take a collective call.

“I’ve spoken to West Bengal finance minister as well… we will have to decide the next step… it is disappointing that Rajasthan has accepted… the decision should be taken together and not individually,” he said, adding that he will take up the so-called breaking of ranks with senior members of the Congress.

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“The Centre has accepted that they will borrow. Given the pick-up in GST collections, the shortfall may not be as much as projected, so Centre should compensate for the entire shortfall and not just for GST implementation,” he added.

GST collections for October crossed Rs 1 lakh crore mark for the first time in eight months and for the first time within this financial year. For the ongoing financial year, however, the total collections are still lower than FY 2019-20 levels.

“Discussions are going on,” a senior official in the Punjab government said, adding that the final decision will be taken after consultations with the remaining states.

In August, the Centre had given all states two options of borrowing to meet the GST compensation shortfall – Rs 97,000 crore and Rs 2.35 lakh crore – with different set of conditions for each. While it sweetened the first option by increasing the borrowing limit to Rs 1.1 lakh crore, the second option was removed as no state showed interest.

Last month, 21 states and two union territories had taken the first option and the Centre had started issuing the funds through back-to-back loans in weekly tranches through a special window coordinated by the finance ministry. So far, Rs 12,000 crore has been issued to states.

With Puducherry and Rajasthan, the number has gone up to 22 states and three union territories. Finance secretary Ajay Bhushan Pandey had told ET that the Centre will continue to persuade the remaining states to take the loans.



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