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Resource centre on India's rural distress
 
 

The future of GST hangs in the balance -Praveen Chakrvarth

-The Hindu

The Centre is best positioned to raise additional resources to bridge the GST compensation gap

Today is the crucial meeting of the Goods and Services Tax (GST) Council. It may not be an exaggeration to claim that today’s meeting could mark a milestone in the history of India’s fiscal federalism and shape the future of Centre-State relations.

In 2017, the Centre made a promise to the States that a certain minimum amount of GST revenues will be guaranteed to every State for every year until 2022. GST was born in the cradle of this promise and hailed as a harbinger of ‘cooperative federalism’. Now, there is not enough money in the GST kitty for the Centre to honour this obligation. The Centre has therefore proposed that the States should borrow money to bridge this gap and that it will act as a guarantor to facilitate this borrowing. Many States have accepted this proposal while many others have rejected it and implored the Centre to borrow. There is a bitter stand-off between the Centre and these protesting States.

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