If states were to borrow the repayment schedules, it would place an increased burden on their already troubled finances, the chief ministers indicated.
Reminding the centre of its “constitutional”, “moral” and “legal” responsibilities in the stand-off over the Rs. 2.35 lakh crore shortfall in GST compensation and financial relief due to the states, 6 non-BJP ruled states’ Chief Ministers have written to the central government over the GST row. Mamata Banerjee (West Bengal), Pinarayi Vijayan (Kerala), Arvind Kejriwal (Delhi), Edappadi K Palaniswami (Tamil Nadu), K Chandrasekhar Rao (Telangana) and Bhupesh Baghel (Chhattisgarh) have written to the centre to reconsider asking states to meet the shortfall by borrowing from the markets. If states were to borrow the repayment schedules, it would place an increased burden on their already troubled finances, the chief ministers indicated. They said the centre could take up this burden and pay back the loan by carrying forward GST cess collection past 2022.
West Bengal CM Mamata Banerjee, in her letter to the centre, reminded Prime Minister Narendra Modi that “… in December 2013… sole reason why BJP was opposing GST implementation was because it did not trust then government of India in honouring GST compensation to states”.
“Today (those) words are ringing true in our ears as we are losing our trust in the BJP government at the centre,” Mamata Banerjee wrote.
She also said the “GST imbroglio” violated the premise of federalism, pointing out that the centre would incur a lower rate of interest than states.
Delhi CM Arvind Kejriwal wrote: “… extremely onerous burden on States… reeling under financial crisis due to shortfall in revenue collections and increased commitment of expenditure emerging from COVID-19 response”.
“The centre is abdicating its responsibility of compensating states…,” KCR, the Telangana CM wrote. He also pointed out that the centre had earned around Rs. 2 lakh crore in additional revenue from a cess on petroleum products that had pre-empted states from increasing VAT on petrol and diesel.
Kerala CM, Pinarayi Vijayan wrote: “It is felt that transferring the obligation of GST compensation to the States through their borrowing is not in accordance with the spirit of understanding reached between the Centre & the States during the discussions preceding the constitutional amendment for bringing in GST.”
“You are well aware that as per constitutional provisions, the Centre is accountable for providing GST compensation,” Bhupesh Baghel, the Chattisgarh CM wrote.
Last week, FM Nirmala Sitharaman had referred to the pandemic as “act of God” that would result into the contraction of the economy. She also said that total GST shortfall for fiscal 2021 was Rs. 97,000 crore and, including compensation because of the pandemic, states were owed Rs. 2.35 lakh crore.
These dues would be cleared but also that it wanted to stay clear of “avoidable borrowing… when it could be done at state level”, the centre had expressed.