Row over GST compensation: Centre to say no to voting

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October 7, 2020 6:30 AM

The Central government has also relied on attorney general’s (AG) opinion. The legal opinion held that states can borrow on the basis of future receipts of compensation and thus do not need Council’s recommendation to raise loan.

“The extension of compensation cess will ensure that states revenue is protected from the proceeds of this fund, and proves that Centre has carried out its legal and moral obligation of keeping the promise to states,” a source said.“The extension of compensation cess will ensure that states revenue is protected from the proceeds of this fund, and proves that Centre has carried out its legal and moral obligation of keeping the promise to states,” a source said.

Even if one or more states don’t want to exercise the borrowing options proposed by the Centre for bridging the GST revenue shortfall, they can’t force an voting on the issue at the GST Council, sources in the Union government feel. The Council, according to them, has no jurisdiction to sit in judgement over such individual choices.

The states that have agreed to exercise one of the borrowing options — 21 of them — can go ahead, even if a consensus remains elusive in the next Council meeting on October 12, the sources added.

As many as 10 states remained defiant even at the 42nd meeting of the Council on Monday. At least two of these states asked for voting on the issue in the meeting. They even asked the Union finance minister to not take them for granted, indicating that they might even move the court for a resolution.

With the Centre’s intervention, it was agreed to meet again a week later to discuss the issue further, state finance minister who attended the meeting said.

Sources said that GST Council has jurisdiction to extend the levy of cess to compensate for the shortfall in the compensation, and it approved the proposal to extend compensation cess levy tenure beyond originally scheduled expiry of June, 2022.

“The extension of compensation cess will ensure that states revenue is protected from the proceeds of this fund, and proves that Centre has carried out its legal and moral obligation of keeping the promise to states,” a source said.

However, states’ entitlement to borrow is government by Section 293 of the Constitution which is beyond GST Council’s ambit. “Now the ball lies in the court of individual states, not the GST council,” another source said. He added that even if a single state is willing to borrow, the others in the Council can’t prevent it from exercising its right guaranteed in the Constitution.

The Central government has also relied on attorney general’s (AG) opinion. The legal opinion held that states can borrow on the basis of future receipts of compensation and thus do not need Council’s recommendation to raise loan.

Earlier on Monday, the Council’s marathon 8-hour long meeting couldn’t break the impasse over the proposed borrowing options meant for compensating states even after one of the two available choices was sweetened further as 10 states continued to demand that Centre should borrow and compensate the states fully for their GST revenue shortfall in FY21.

At least 21 states are in favour of ‘option 1’ of the borrowing plan and states namely Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, West Bengal and Chhattisgarh are not on board with the proposal.

The original ‘option 1’ of borrowing amount Rs 97,000 crore was revised to Rs 1.1 lakh crore after states the basis of calculating shortfall was changed.

In the meanwhile, Council decided that the cess collection this year so far amounting to Rs 20,000 crore would be disbursed to states on Monday. Further, it was also decided to disburse Rs 25,000 crore to states that hadn’t received its due share in the first year of GST implementation.

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