No solution in sight: Centre must borrow entire GST shortfall, opposition reiterates

New Delhi: States governed by non-BJP parties have demanded that the Centre borrow the entire amount needed to meet the shortfall in Goods and Services Tax, not 1.1 lakh crore the finance ministry proposed. West Bengal, Kerala, Jharkhand, Chhattisgarh, Rajasthan and Punjab ‘welcomed’ the ministry’s offer but have not accepted it.

Chhattisgarh commercial tax minister TS Singhdeo told ET: “Our stance is that the Centre should borrow the full amount of shortfall and compensate the states. They have written to us with the final offer to borrow 1.1 lakh crore. But whatever be the financial implication, it should be met by the Centre.” Chhattisgarh chief minister Bhupesh Baghel is likely to write to finance minister Nirmala Sitharaman apprising her that the Centre’s proposal was a step in the right direction but Chhattisgarh would accept it only if compensated for the entire shortfall.

According to sources, West Bengal finance minister Amit Mitra raised the point on behalf of the opposition-ruled states when he spoke with Sitharaman. Mitra questioned the Centre’s statistics and the future course of action for the rest of the fiscal. Jharkhand finance minister Rameshwar Oraon told ET: “The Centre needs to borrow the entire amount and compensate states for the shortfall. We cannot accept this part payment. There should also be clarity on what would be the future course of action.” Oraon said opposition-ruled states are expected to discuss the issue next week and take a common stance.

The controversy was triggered by GST revenue shortfall of 2.35 lakh crore for states following the lockdown. As per GST Act, the Centre has to compensate for any GST losses. Opposition-ruled states plan to seek legal opinion on how to pursue the case if the Centre refuses to give the entire amount. The finance minister of an opposition-ruled state, who did not wish to be identified, told ET: “We do not want to go to the Supreme Court before the Union finance ministry finally rejects our proposal. But we are taking legal views so that we are prepared for judicial intervention.”