Highlights of 43rd GST Council meeting held on 12th October 2020 which was continuation of earlier meeting Today’s meeting was a continuation of the 42nd GST Council meeting, to discuss one agenda item, namely no. 9A.
Finance Minister Smt. Nirmala Sitharaman has chaired the GST Council meeting via video conferencing in the presence of Union Minister of State for Finance & Corporate Affairs, Shri. Anurag Thakur, Finance Ministers of States & UTs and Senior officers from Union Government & States.
Today’s meeting was a continuation of the 42nd GST Council meeting, to discuss one agenda item, namely no. 9A Discussions went on the issue of borrowing, extension of cess and so on.
States asked some specific clarifications, which were given Many of the clarifications were on Attorney General’s opinion on borrowing, GST Councils authority to extend cess collection beyond 5 years.
GST Council meeting started with each state thanking the Centre for the provision of 50-year interest-free loans announced today, as well as on the additional fund allocation for capital expenditure.
FM explained that GST Council is a body which represents a very high authority of Finance Ministers of all states. As regards shortfall in compensation, it is for everyone to see that cess collection is inadequate to meet the shortfall Since this is something which was not envisaged, the shortfall has to be met by borrowing.
Centre has issued a borrowing calendar, if I go beyond that to borrow, the G-Sec deals which are used as benchmark for every other borrowing will go up, this will hence increase borrowing costs for states & private sector too: Finance Minister
As regards shortfall in compensation, it is for everyone to see that cess collection is inadequate to meet the shortfall Since this is something which was not envisaged, the shortfall has to be met by borrowing. Increased borrowed costs is not something we can afford at a time when India is looking at more money to invest and to borrow to do business – Finance Minister
Increased borrowed costs is not something we can afford at a time when India is looking at more money to invest and to borrow to do business – Finance Minister
The impact would not be as severe, if states were to borrow States borrowing does not mean a chaotic situation, we will facilitate states so that some states end up paying high interest rates while others obtain loans at reasonable rate – Finance Minister
Majority of the states had opted for Option 1 On the one hand, they were repeatedly asking for speedy loans On the other, other states kept saying let us decide on the basis of consensus, as we have not opted for Option 1.
Option 1 presented to @GST_Council: To provide a special window to states, in consultation with @RBI, to provide the ₹ 97,000 crore at a reasonable rate of interest, this money can then be repaid after 5 years from collection of cess
No consensus has been arrived on options presented to states in meeting GST compensation shortfall. Can certainly take a call on cess, collection of cess, extending cess collection period. But members had the question, can the GST Council order?
@GST_Council has been gracious enough in unanimously agreeing to extend the cess beyond 5 years, to repay the principal and interest of the entire compensation There is no dispute on this, the entire compensation has to be paid, it will be paid – Finance Minister @nsitharaman
While concluding, I said while I respect there is no unanimity, I asked the Council whether members can stop other members from doing what they want to do Can the Council stop a member from wanting to borrow and say the cess will repay that borrowing? – asks Finance Minister
Unfortunately, we were not able to arrive at a consensus I appealed to all states – we have to quickly give answers to states who are fighting #COVID19 on the ground and who want money in their hands – that is how the @GST_Council meeting ended today – FM
Does the collective conscience of the @GST_Council in its quest for unanimity, which I too strived for, allow us to hold back states which have opted for a borrowing option, saying we have to hold you back till a consensus is arrived at ? I asked this to the members, says FM
There were certain amounts to be given to states on % basis, and certain based on actual quantum, in the award given by @15thFinCom last year before #COVID Centre has carried out these responsibilities to states, even in wake of #COVID19 – @FinMinIndia
We have already increased our borrowing from ₹ 7.8 lakh crore to ₹ 12 lakh crore, in the first half of this year, we have borrowed more than what we did in the whole of last year – @FinMinIndia
Strain on central govt. fiscal situation will have a greater bearing on macroeconomic fundamentals. In interest of all players in the system, it is better if we do not expand the central fiscal deficit beyond a point – @FinMinIndia
on the question of Central borrowing.
Both interest and principal for the borrowing will be paid out of compensation cess collected from July 2022, it will be paid neither from Central nor from state resources. It is hence actually a third party who is taking the burden of both principal and interest: @FinMinIndia
When states come to us, we will work with them and estimate the shortfall each state would face, the compensation which would become available to them, working along with @RBI, Centre will ensure that they get a good interest rate. Many states are ready for this.
Source- GST Handle of PIB Maharashtra and Press Briefing by Hon;ble Finance Minister Smt. Nirmala Sitharaman