GST Compensation: Kerala Prefers Option 3 But Will Settle For Option 4
Don’t take us for granted, Kerala Finance Minister tells central government on GST compensation controversy.
Kerala’s Finance Minister, Thomas Isaac, has countered the two options offered by the central government on GST compensation, with two of his own.
Isaac reiterated in an interview to BloombergQuint that, as per the constitutional amendment, the centre should be the one to borrow and compensate the states for the shortfall in the goods and services tax revenue. Currently, both options proffered by the centre involve the states borrowing to meet the shortfall. If it’s unwilling to do that then it must discuss and negotiate with the states to find an acceptable resolution, said Isaac.
“You cannot unilaterally decide this, you have to negotiate. The central government is unwilling to negotiate on this. They are saying either you choose one or you go to two. That's not fair.”
Under option 1, the centre has proposed the states borrow Rs 1.1 lakh crore this financial year, with central assistance and interest subsidy, and the remaining Rs 1.25 lakh crore in compensation is recouped by extending the cess period beyond 2022. The second option involves borrowing the full Rs 2.35 lakh crore of the estimated shortfall but with no central help. The centre said 21 states have picked option 1, though the number stands disputed.
Isaac would like the central government to reconsider
- Who does the borrowing and how much.
- The conditions that apply to state borrowing.
- The part deferment of compensation due this year.
If the centre isn’t willing to negotiate and the states don’t come around, the matter will likely be put to vote in the next GST Council meeting scheduled for Oct. 12. Isaac said the council’s decision will be binding. But that doesn’t stop states from activating the GST dispute resolution process or even moving the Supreme Court.
Now, we are bound by the council’s decision. So, we’ll follow that but we’ll have a dispute and we will argue and set up a dispute resolution mechanism in the next GST Council after that. And if no dispute resolution mechanism is set up, then, the option would be to go to the Supreme Court while complying with the decision of the council.Thomas Isaac, Finance Minister, Kerala
In fact, Isaac expressed surprise that a vote didn’t take place in the last meeting, which he said was abruptly called to an end. West Bengal Finance Minister Amit Mitra made a similar comment to BloombergQuint.
After speaking for eight hours, suddenly the revenue secretary says the meeting is over, Isaac recounted. “So I said, don't take us for granted.” Isaac indicated a vote in that meeting may not have succeeded.
“I suspected at that moment, in the last half an hour of the last GST Council (meet), I wondered if there would have been sufficient states to vote for the centre’s proposal, for the centre to get the required majority — that is 75% of the votes.”