BJP-ruled States seek faster GST solution, want expeditious rollout of borrowing window

New Delhi: BJP-ruled states are likely to press for expeditious rollout of the ₹1.1 lakh crore special borrowing mechanism offered by the Centre to bridge the deficit in the goods and services tax (GST) compensation cess fund. They don’t support setting up a group of ministers (GoM) to resolve the issue, as has been suggested by some opposition-ruled states, citing their urgent need for funds.

This suggests a hardening of views that portends a stormy GST Council meeting on October 12.

“All these statements are politically motivated… We want immediate resolution,” Bihar deputy chief minister Sushil Kumar Modi told ET. “The Centre should facilitate the borrowing for states that have already exercised their choice on options given.” He said states want money for their expenditure and cannot wait any longer.

Wedge Along Party Lines
Opposition-ruled states want the Centre to borrow the money and compensate them for revenue lost due to the introduction of GST in 2017. Some are open to a third option in which the Centre undertakes part of the borrowing.


Gujarat FM Nitinbhai Patel said the state will push for immediate release of funds under the first borrowing option.

Punjab has proposed a GoM to break the impasse that has driven a wedge in the GST Council along the party lines. Kerala and Chhattisgarh have backed the GoM suggestion.

The Centre has offered two options to bridge the gap. Under the first, states will borrow ₹1.1 lakh crore, equivalent to the revenue loss on account of GST transition. This borrowing would be serviced from the cess, which has now been extended to beyond the five-year period that ends June 2022. In the second option, the states would borrow ₹2.35 lakh crore, which covers the shortfall due to GST implementation and that due to the pandemic-induced economic collapse. However, in this case, states would have to bear the interest while the principal would be serviced from the compensation cess.

As many as 21 states have communicated their preference for the first option, but 10 states and Union territories, largely opposition-ruled, have rejected both options.