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42nd GST Meeting Council: Clashes or Consensus

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The 42nd GST meeting is expecting fireworks to be chaired by finance minister Nirmala Sitharaman.

The showdown is expected between the Centre and states over the contentious issue of opting between two options kept by the Centre to states. They grapple with meeting GST shortfall when the pandemic hits revenue.

India is countered by 21 states that are either ruled by the BJP have choose option to borrow Rs 97,000 crore, others like Delhi, Punjab, West Bengal, Telangana, Chhattisgarh, Tamil Nadu, Rajasthan, Kerala, and Puducherry resisted both options and put the bonus of borrowing on the Centre to help them meet the shortfall.

Indications are that these opposition-ruled states would resist attempt at the GST Council meeting that would favor a decision that involves borrowing by states.

In the 41st meeting on 7 August, the Centre gave two options — either borrow Rs 97,000 crore that is the estimated shortfall due to the GST implementation or borrow entire Rs 2.35 lakh crore shortfall in revenue bringing to loss because of the pandemic.

The Centre further added that states would get a 0.5% relaxation in the borrowing limit under the FRBM Act if they opt for borrowing Rs 97,000 crore while no such ease would be offered if the states were to opt for the other.

But the lackluster performance of the economy in the previous fiscal meant a decreased collection of cess.
The situation likely to worsen this year as the pandemic brought the economic growth to negative territory after a four-decade period, which concludes the revenue collection will see severe stress in the current fiscal.

While the BJP ruled states and those that support the party have primarily agreed to go with the option of borrowing Rs 97,000 crore, the opposition-led states have put their foot down since they maintained a defiant stance that borrowing by states will endanger their finances further.

Today’s 42nd meeting is expected to build some consensus among opposing states and Centre.

Finance minister, Nirmala Sitharaman, said that the Centre is not reneging on its promise to compensate the states for the shortfall due to the GST implementation. How that is going to play out is a call the GST Council meeting would take today.

Written By- Mousami Jena
Image Courtsey- Google

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