Manipur is the only state that has opted for the second option that entails borrowing under the Rs 2.35 lakh crore window, which entails revenue shortfall due to GST transition as also Covid19 induced economic slowdown.
Goa, Assam, Arunachal Pradesh, Nagaland, Mizoram and Himachal Pradesh are likely to give their preference among both the borrowing options provided by Centre last month, in a couple of days.
The GST revenues including the compensation cess collections have been hit hard following the pandemic.
The centre, which has additional borrowing planned for FY21, wants states to go for borrowing to meet the shortfall in the cess fund. Under the first window, both the principal and interest would be serviced via the cess fund and states would also receive balance compensation( Covid19 revenue loss). In the second option, principal would be serviced by the cess fund.
The GST Council will now meet on October 5, instead of September 19. The issue of GST compensation shortfall may be raised in the monsoon session of Parliament that begins from today.
About 10 Opposition led states have rejected both borrowing options on the grounds that the Centre should borrow instead of states, while some have also sought the Prime Minister’s intervention to resolve the burning issue.
The Centre has maintained that it is not under the obligation to compensate for loss of revenue, relying on the opinion of the Attorney General which has said that the GST Council has to find ways to meet the shortfall in compensation and not the Central government.
In the current economic scenario it may not be possible to increase tax rates or do rate rationalisation to meet up the compensation shortfall, the Centre had said in the Council meeting on August 27, putting forth two borrowing options for states.