Even as the non-BJP states sharpen their attack against the GST Council's proposal asking states to borrow either from a special window or open market to meet their GST compensation gap, Bihar Deputy Chief Minister and Finance Minister Sushil Modi has expressed hope that all the difference would be sorted out in the GST Council meeting.
"Whatever is being said outside the meeting is not very important, what they are saying inside the meeting is important. All the decisions in GST Council so far have been taken unanimously barring one. In the past also, there have been fierce arguments and discussions but decisions in the GST Council have been taken unanimously," says Sushil Modi talking to Business Today.
He says some states are trying to make it an issue of the Centre versus states, but this is not an issue between the Centre and the states as both are stakeholders and more collaborative efforts are required in the GST Council.
He said that the Centre's finances are also under stress. "It is not that they have plenty of money, their coffers are full and they are not helping the states. In this case, both the centre and the states are stressed, and what the Centre is offering is the best possible they could," he said.
He says that Centre will not borrow directly, which it has made clear and therefore, states cannot force the Centre to borrow on their behalf.
"If they go for borrowing, the yield will go up very high. Besides, the Centre is already borrowing Rs 12 lakh crore (for the current financial year) so it is not feasible for them to borrow another Rs 2.35 lakh crore at one go," he said adding that if the Centre is facilitating everything and even taking care of the principal and interest, how does it make a difference if the Centre is borrowing or the states.
Talking about the two options that the Centre has offered to states, the Bihar Deputy CM says that Option 1 is the best option, and he urged the states to opt for it. "Under Option 1, the Centre is not only taking care of both the principal and the interest, but also allowing a 1 per cent higher fiscal deficit," he says.
Under Option 1, states could borrow only that part of the compensation gap, which is due to implementation of GST. As per revenue department's calculation that could be around Rs 97,000 crore in the current financial year. So, if the states go for Option 1, they can borrow from a special window to be provided by the Centre at an interest rate equivalent to G-sec rates of similar tenure.
Under Option 2, states can borrow from the market the full amount of compensation gap caused by the combined effect of GST implementation and Coid-19. However, the Centre will only repay the principal amount and the interest cost would be borne by the states.
Meanwhile, many non-BJP ruled states have rejected the Centre's options on GST Compensation. Kerala Finance Minister in a tweet said that FMs of Punjab, Delhi, West Bengal, Chhattisgarh, Telengana and Kerala have agreed to reject the Centre's options on GST compensation. He said that that the Central government should borrow entire compensation due.