Finance Minister Manpreet Singh Badal told this newspaper that he will pitch for market borrowing to compensate states. “Our stand will be to extend the cess collection period for another 2-3 years for the repayment.”
Echoing Badal’s views, Kerala
Finance Minister Thomas Isaac
said the GST
Council should be allowed to borrow from the markets to pay states. He argued that the Centre could provide a sovereign guarantee. “It is a fund (compensation cess), which can borrow. Centre can give the guarantee, what is the problem there,” he said.
However, Modi told Business Standard that borrowing would not be feasible for both the Centre and states. “I personally feel that borrowing from the market is wishful thinking as no one will give a loan at this time. The question is also, who will take a loan and how will it be repaid,” he said.
He said states will have to accept that compensation will not be possible in case cess collection is inadequate.
West Bengal Finance Minister Amit Mitra said the council does not have any equity or security to offer to be able to borrow. He said former finance minister Arun Jaitley had discussed a scenario where there would be a shortfall in cess collection and the possibility of borrowing from the market. “He had said that we may have to borrow and pay back after the sixth or seventh year after the compensation period is over. The question is how? The GST
Council doesn’t have a locus standi, how can it borrow? It doesn’t have equity and doesn’t have any security to offer.”
Mitra added that the only option is a sovereign guarantee by the Centre.
“But we don’t even know if that will happen,” he added.
Assam Finance Minister Himanta Biswa Sarma said that it would not be possible for the GST Council to borrow. Only the Centre can do so. “The GST Council is neither a sovereign body nor a sub-sovereign body. So even if you take a loan, somebody has to give a guarantee. If the central government gives guarantee to loans, the central government can itself borrow,” he said.