Chhattisgarh CM writes to FM Sitharaman opposing Centre's options for GST Compensation

Opposing Centre's two-options to meet GST compensation required by States, Chhattisgarh CM Bhupesh Baghel wrote to Union Finance Minister on Monday urging that Union Government should arrange amount required. Baghel reasoned that if State Government obtains amount through a loan, n entire burden will fall on m. He added that entire solution suggested by Finance Ministry is 'tedious and uncertain' in nature. 

In his letter to Finance Minister, Chhatisgarh CM argued, "If states take a loan for compensation, n entire burden will fall on state government and if Centre decides to pay off loan, n re will be uncertainty over amount. To meet GST compensation, cess obtained by Centre and repaying loan taken by States from this amount is a very tedious and uncertain process." 

"I request you that States should t be given any loans and instead Centre should arrange amount to meet GST compensation," Baghel added. 

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Centre's two options to States

Centre has calculated compensation requirement by states in current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from cess levied in GST regime. Revenue Secretary Ajay Bhushan Pandey said of this, Rs 97,000 crore is on account of GST shortfall, while rest is due to impact of COVID-19 on ecomy. Centre has reportedly refused to pay mandatory GST compensation of 14% for current year due to COVID-19 pandemic.

• To alleviate state's GST stress, Revenue Secretary Ajay Bhushan Pandey said a special window can be provided to states at a reasonable interest rate for borrowing of Rs 97,000 crore - amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
• second option before states is to borrow entire Rs 2.35 lakh crore shortfall under special window. "States have been given seven days' time to think over proposal," Pandey said.

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