Hitting out at the Centre over the GST compensation issue, West Bengal Finance Minister Amit Mitra alleged that political muscle was being flexed to make the states agree to the options offered to meet the revenue shortfall.
If the two options made available by the Centre are forced through with a majority vote at the next GST Council meeting, “it will be a historic mistake for India”, Mr. Mitra said.
The Centre has presented two options to the states under which they can borrow from the market to make up for the estimated deficit of ₹ 2.35 lakh crore this fiscal.
After the 41st meeting of the GST Council on August 27, Union Finance Minister Nirmala Sitharaman had said that the COVID-19 pandemic, which is an “Act of God”, has hit the economy and GST collection.
“…what happened in the five hours of discussion in the GST Council, no options were discussed. All of a sudden at the end of the meeting, two options were placed and the meeting ends. In other words, you are forcing the states into two options rather than three or four options. We felt there was a third option but nobody was there to listen,” Mr. Mitra said in an interview to news website The Wire recently.
“Now, political muscle is being used what I would call muscular majoritarianism to get to states agree to one or two of the options. I cannot reveal whether we will go to court as a strategy,” he added.
He said the Centre’s move would challenge the very foundation of the Goods and Services Tax, and if the GST Council becomes a divided house, “the federalist spirit will breakdown.”
“There will be distrust in place of trust. Therefore, the whole GST experiment on a consensus basis on the federalist polity will become a problem,” Mr. Mitra said.
Of the estimated deficit, ₹ 97,000 crore is on account of GST shortfall, while the rest is due to the impact of COVID-19 on the economy, according to Revenue Secretary Ajay Bhushan Pandey.
A special window can be provided to the states, in consultation with the RBI, at a reasonable interest rate for the borrowing of ₹ 97,000 crore. The second option before the states is to borrow the entire ₹ 2.35 lakh crore shortfall, the top official had said.
Mr. Mitra said the states do not have the headroom to borrow to make up for the GST shortfall and, compelled by the COVID-19 pandemic and cyclone ‘Amphan’ in West Bengal particularly, to just survive.
“I have gathered from the media that the Reserve Bank of India is saying it is much easier for the Government of India to borrow. I would also say that if they have a problem, they can monetise their debt but states cannot,” he said.