Finance Minister Nirmala Sitharaman during a briefing with reporters after the 41st meeting of the GST Council said the economy is facing an extraordinary 'Act of God' situation, which may result in economic contraction.
The Centre on August 27 placed before the GST Council two options for borrowing by states to meet the shortfall in GST revenues, pegged at Rs 2.35 lakh crore in the current fiscal.
As per the Centre's calculation, the compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Hence, the total shortfall is estimated at Rs 2.35 lakh crore.
Revenue Secretary Ajay Bhushan Pandey said of this, Rs 97,000 crore is on account of GST shortfall, while the rest is due to the impact of COVID-19 on the economy.
Pandey said a special window can be provided to the states, in consultation with the RBI, at a reasonable interest rate for borrowing of Rs 97,000 crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
The second option before the states is to borrow the entire Rs 2.35 lakh crore shortfall under the special window.
"States have been given seven days' time to think over the proposal," Pandey said.