At a time when exchequers of the states have almost dried up due to economic stagnation triggered by Covid-19 pandemic, the 41st GST Council meeting on Thursday was the platform that was being looked at with much hope. It was expected that keeping in tune with the constitutional obligations which the GST Act itself spells out, the Centre will release the pending GST dues,  that are now desperately needed by the states to tide over the current financial difficulties. But, to their utter dismay, they were told that due to the unprecedented financial exigencies caused by the pandemic, the Centre is not in a position to oblige. This has come as a real shocker for the states and has raised eyebrows, setting into motion the debate- how the Centre can wash off its hands so easily from an obligation from which the very definition of ‘cooperative federalism’ draws inspiration?

The Finance Ministry has explained and attributed the relinquishment of the commitment entirely on the pandemic and the exact term used was: “Act of God” in the stormy 5-hour meeting. In a move that has been viewed as ‘evasion of responsibilities’ by the Centre, two alternatives have been placed before the states to resolve the compensation shortfall estimated to be in the tune of Rs 2.35 lakh crore. As /first option, a special window would be provided to the states with RBI playing the role of a consultant for borrowing the projected GST shortfall of Rs 97,000 crore which can be repaid by the states after five years of GST implementation ending 2022 from the compensation cess fund. The second one proposes borrowing the entire Rs 2.35 lakh crore projected shortfall under a special borrowing window facilitated by the RBI. From both options it’s clear that it’s the borrowing route that has been thrust upon which otherwise means a constant pressure to repay the loans within deadlines, even if a certain leeway in borrowing and repayment has been given. As it stands, financial statuses of the states will be no brighter from the current one and a time period of 7-days has been given to weigh options.

It is pertinent to mention that no GST compensation for the current 2020-21 FY has arrived from the Centre yet and even if the pandemic has been cited as the singular cause for the financial crunch, delays have been a marked feature dating back a year earlier when there was no Covid. It’s quite evident that the reason thereto has been the overall economic slowdown that gripped the economy.  

Heated deliberations are in the offing over the next week along with escalation of headache for the states as to how to swim over the situation. But, it must be said that federal disharmony hasn’t been so deep before.

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Kenter Joya Riba

(Managing Editor)
      She is a graduate in Science with post graduation in Sociology from University of Pune. She has been in the media industry for nearly a decade. Before turning to print business, she has been associated with radio and television.
Email: kenterjoyaz@easternsentinel.in / editoreasternsentinel@gmail.com
Phone: 0360-2212313

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