Option one, which allows states to borrow Rs 97,000 crore through a special window facilitated by the RBI involves deferment of compensation payment beyond 5 years for which a GST Council decision is necessary as per AG’s opinion, and no such decision has been made in the Council, Thomas Isaac tweeted
Kerala Finance Minister Thomas Isaac on October 12 said Finance Minister Nirmala Sitharaman's announcement that she is going to permit 21 states to borrow Rs 97,000 crore to meet the GST revenue shortfall is illegal.
He also said: "Option one involves deferment of compensation payment beyond 5 years for which a Council decision is necessary as per AG’s opinion. No such decision has been made in the Council."
It is unfortunate that Union FM does not propose a decision in the Council or even make a statement what she is going to do but choose to make the announcement in the press conference. Why does Centre refuse to take a decision in Council? Total disregard for democratic norms.
— Thomas Isaac (@drthomasisaac) October 12, 2020
An example of fiscally prudent stimulus policy of Central Govt : ₹20000 cr 50 year interest free additional loan to states. Kerala is entitled ₹200 cr. Some stimulus indeed!#STIMULUSPACKAGE— Thomas Isaac (@drthomasisaac) October 12, 2020
Before the GST council meet began, West Bengal Finance Minister Amit Mitra had said on October 12: "Today, will Nirmala Sitharaman with Modi’s direction ignore and muzzle views of 10 States at GST Council, using brute majoritarianism? If she does, it will impart a death blow to Cooperative Federalism already on ventilator. Will today be marked a black day for India's democracy?"
However, 12 states have agreed to the Centre’s Rs 97,000-crore borrowing option. The 12 states are Andhra Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh, Uttarakhand, Bihar, Gujarat, Haryana, Odisha, Meghalaya, Sikkim, and Tripura.
Manipur is the only state that opted for the second option.
In August, the Centre had proposed two options to states to meet the GST compensation shortfall of Rs 2.35 lakh crore. The states were given the option to either borrow Rs 97,000 crore through a special window facilitated by the Reserve Bank of India (RBI) or to borrow the complete shortfall from the market.
Meanwhile, six states, namely, Himachal Pradesh, Goa, Assam, Nagaland, Mizoram, and Arunachal Pradesh have said they will notify the Centre on the option they wish to go with in a day or two.
Speaking at the 42nd Goods and Services Tax (GST) Council meet via video conferencing on October 12, Finance Minister Nirmala Sitharaman said: “States need not have doubts; this loan is to be paid by cess and they would not be burdened. I would appeal to all states to find a solution.”Commenting on the options given to states to make up for the GST compensation shortfall, she said: “There was no consensus on the matter. The GST Council can certainly take a call on cess, the collection of cess, and extending the period of collection of cess, which has been extended beyond five years.”