NRI Dunia
Think Outside The Box

As some states accept GST offer, Opposition plans strategy meet

Opposition-ruled states will formulate a strategy that may include activating the dispute resolution mechanism after Bihar, Assam and Karnataka decided to accept one of the two options offered by the Centre for GST compensation.

The states are likely to firm up their plan after their officials get back with the clarifications sought from the Finance Ministry. An opportunity to meet may take place during the forthcoming Parliamentary Session as the next GST Council meet will be held on September 19, a few days after Parliament convenes.

The Centre’s two options for compensating states for their GST dues have already been rejected by West Bengal, Tamil Nadu, Kerala, Chhattisgarh, Rajasthan, Telangana, Delhi, Puducherry, and Punjab.

While Assam and Karnataka are BJP ruled, the party is a junior partner in the Bihar government. Their acquiescence has not been without a political cost as the opposition has criticized the respective state governments for letting go of their legitimate dues from the Centre.

Karnataka has chosen the first option and is eligible for Rs 18,289 crore out of which the Centre will straightaway provide Rs 6965 crore and the rest will have to be borrowed, to be compensated later. By choosing the first option, it becomes eligible to borrow one percent of State GDP without any conditions.

Under this option, the Centre had said instead of Rs 2.35 lakh-crore, states are eligible for Rs 97,000 crore because rest of the revenue was lost due to the “Hand of God.’’ Punjab CM Amarinder Singh and Chhattisgarh CM Bhupesh Baghel have contested the growth assumptions and the concept of bifurcating revenue loss figures into Covid (“Hand of God’’) and non-Covid.

Under the second option (and originally as well), Karnataka was eligible for Rs 25,508 crore. It will get Rs 6965 crore straightaway and the rest will have to be borrowed. However, only additional borrowing of 0.5 per cent of State GDP will be available without any conditions.

Most of the opposing states are asking the Centre to borrow from the market and compensate them the amount promised when inking the GST pact.

Though the one-week deadline for conveying the options ended on Friday, this is not an issue as states are still engaged in seeking clarifications from the Union Finance Ministry.