Nirmala Sitharaman, India’s finance minister, wears a protective mask while speaking during a news conference. (Photographer. T. Narayan/Bloomberg)
5 years ago
Oct 12, 2020
The Goods and Services Tax Council is meeting again to discuss the contentious issue of compensation as the central government aims to reach a consensus with the non-Bharatiya Janata Party-ruled states.
Finance Minister Nirmala Sitharman said that the GST Council today discussed various issues of borrowing options that states have and extension of cess.
The states continued to voice their opinions and sought clarifications, the finance minister said.
Sitharaman also said that states thanked the centre for the capital expenditure funds announced earlier in the day.
The central government cannot increase its borrowing to pay off the states' GST dues as the borrowing calendar has already been announced, Sitharaman said.
"If I increase borrowing beyond what is planned, it will immediately jack up the G-sec yields. If that happens, the borrowing costs will go up," Sitharaman said. "If states are made to borrow, the problem will not be that severe."
Majority of states had chosen option 1, and they were asking the centre to speedily get money, Sitharaman said. "There are some other states asking to take a decision in consensus."
Economic Affairs Secretary Tarun Bajaj said that the centre devolved taxes to states based on the recommendations of the 15th Finance Commission despite a shortfall in tax revenue due to the Covid-19 pandemic.
Bajaj defended the centre's stance of not borrowing more to pay states their dues by saying that the government's fiscal position is already strained. "It is better if we do not expand central fiscal deficit beyond a point."
