It would be more practical for the Centre to take loans to pay off the GST compensation amount to states, said chief minister Bhupesh Baghel demanding Rs 2,828 crores for Chhattisgarh for a similar for 2020-21.
The chief minister wrote to Union Finance Minister over the issue and said that the Centre will have to take loans to pay off the states instead of advising states to take loan, he also added that the Reserve Bank of India (RBI) provides loans at varying rates to different states, which could lead to disparity, thereby urging the Centre to do the needful.
“As per the constitutional provisions, it’s the responsibility of central government to supply GST compensation amount. Whether states take the loan to meet the scarcity of GST collection, then the financial burden would fall on the states, and as central government is responsible for payment of GST compensation amount, the loan repayment situation would transform uncertain and complicated,” Baghel said through his letter.
He said that as per provisions, GST compensation will have to be paid to states each and every two months and the Chhattisgarh government has not yet received Rs 2,828 crores amount even after four months of fiscal year 2020-21, due to this fact, the amount will have to be sanctioned to the state without any longer delay.
The two borrowing options to meet the GST compensation requirement for 2020-21 consequent to the discussions in the 41st assembly of the GST Council held on August 27 has been communicated to states which could, in turn, communicate their preference inside seven working days, the Finance Ministry said on Saturday.
A assembly of State Finance Secretaries with the Union Finance Secretary and Secretary (Expenditure) is scheduled to be held on September 1, 2020, for clarifying issues, whether any.
The first option provides a special window to states in consultation with the Reserve Bank of India (RBI) to supply Rs 97,000 crore at a fair rate of interest. This money can then be repaid after five years from the collection of cess.
The second one option is that all the GST compensation hole of Rs 2.35 lakh of this year may also be met by states in consultation with the RBI.