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Centre must borrow and pay States’ GST dues: Kerala

-The Hindu

State rejects Centre’s options; to work for consensus among States.

THIRUVANANTHAPURAM: Kerala has rejected the two options for Goods and Services Tax (GST) compensation mooted by the Centre at the 41st GST Council meeting earlier this week. Instead the State has asked the Centre to take a loan and provide compensation to the States.

“We have decided to inform the Centre in writing that the State cannot agree to the two options put forward in the GST Council on August 27. Kerala wants the Centre to take a loan and provide GST compensation and this has the approval of Chief Minister Pinarayi Vijayan and other Ministers,” Finance Minister T.M. Thomas Issac told a press conference here on Saturday.

Under the two options put forward at the Council meeting, the first was a special window for States, in consultation with the RBI, to borrow [collectively] 97,000 crore at a reasonable interest rate. The second option was to borrow the entire 2.35 lakh crore shortfall under the special window.

The Centre acknowledged that the States are likely to face a GST revenue gap of 3 lakh crore this year as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman termed an unforeseen “act of God”.

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