As some states oppose borrowing money, Andhra Pradesh chief minister Jaganmohan Reddy says it is the…

As some states oppose borrowing money, Andhra Pradesh chief minister Jaganmohan Reddy says it is the…

Home / India News / As some states oppose borrowing money, Andhra Pradesh chief minister Jaganmohan Reddy says it is the only way to overcome GST shortfall

Andhra Pradesh chief minister Jaganmohan Reddy has called borrowing the only way to overcome the crisis states face amid the Centre’s inability to reimburse them for the shortfall of Rs 2.35 lakh crore in their share of Goods and Services Tax (GST) revenue this financial year.

“The only way to overcome the crisis is borrowing. The Centre has also asked the states to go for additional borrowings. As we cannot tax people more, we are working on possible additional revenue-generating options,” said Reddy in an interview to HT.

Reddy’s comments came even as some states have opposed the option of borrowing the Centre has given to states because of delays in GST compensation.

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West Bengal finance minister Amit Mitra on Monday said state governments were not in a position to borrow any money from the market and criticised the Centre for imposing the idea on them with no proper consultation.

At a GST Council meeting on August 27, the Centre gave the states’ option of either borrowing the compensation amount arising from implementing GST (Rs 97,000 crore) or the entire shortfall (Rs 2.35 lakh crore). If they exercise the first option, the interest and principal amount will come from the cess levied on products like liquor, cigarettes, aerated water and automobiles. In the case of the second option, the states will have to bear the interest burden.

Reddy said the Centre is taking its time and paying a little late, but it is not that there has been any drastic cut-down. “They have been passing on [the money] with some delays. This is understandable, keeping in view the Covid-19 situation and its impact on the country’s economy,” he said.

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The Covid-19 pandemic and the subsequent 68-day hard lockdown have taken a toll on the economy, causing a 23.9% contraction in the quarter that ended on June 30.

HT on Tuesday reported the Centre remains committed to reimbursing states the entire shortfall and that only immediate compensation may not be forthcoming.

West Bengal chief minister Mamata Banerjee on September 2 wrote to Prime Minister Narendra Modi saying that she was “deeply anguished” by the GST imbroglio which was violating the very premise of federalism. She said the Centre is duty-bound to give compensation to states.

Some states have demanded that the Centre borrow the money. Kerala finance minister Thomas Isaac tweeted, “FMs [finance ministers] of Punjab, Delhi, W[est] Bengal, Chhattisgarh, Telangana and Kerala agreed to reject the Centre’s options on GST compensation. Our option: Central Govt to borrow entire compensation due regardless of acts of gods, humans or nature, to be paid back by extending the period of Cess.”

Isaac was referring to Union finance minister Nirmala Sitharaman’s comment on the compensation crisis being caused by “an Act of God”.

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