GST compensation row: Have not picked either option, says Puducherry CM

The GST Council needs the support of 20 states to pass any resolution in case voting is required.
Intensifying the Centre-state tussle, Puducherry Chief Minister V Narayanasamy denied picking either of the two borrowing options proposed by the Centre to meet the shortfall in goods and services tax (GST) compensation, contrary to claims made by finance ministry sources.

Narayanasamy told Business Standard that in a letter to Union Finance Minister Nirmala Sitharaman, he demanded that the Government of India borrow and give compensation to states. However, if  “all the states” agree with any other option, including the ones proposed by the Centre, the Union Territory (UT) will consider that, he said. He added that the Centre is using this to wrongfully say that it has picked the first option.

Central government officials claimed on Sunday that 21 states and UTs, including Puducherry, had picked the first option of borrowing through the Rs 97,000-crore Reserve Bank of India (RBI) window.

“As far as we are concerned, we are sticking to our demand that the Government of India should borrow and give. It is the first option that we have given to the Centre. After all, it is the liability of the Government of India. As a second option, we have said, if all states agree to any other option, we may consider that. The key here is that all the states should agree to that,” said Narayanasamy.

According to government sources, the 21 states and UTs that had agreed are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand, and Uttar Pradesh (UP).

The GST Council needs the support of 20 states to pass any resolution in case voting is required.

Meanwhile, with voting clearly going in favour of the Centre with at least 20 states picking the first option, some dissenting states might seek a settlement of the issue by operationalising the dispute resolution mechanism in a meeting on October 5.

Finance ministry officials had on Sunday also said in the present situation, these states will have to wait till June 2022 to get their compensation, subject to the council extending the cess collection period beyond June 30, 2022.

Kerala Finance Minister T M Thomas Isaac on Monday said the Centre should stop serving ultimatums to states. “Central government is only a member of the GST Council with 33.3 per cent of votes. It is the council that has constitutional powers to take decisions. Centre should call the council meeting immediately and stop issuing these threats. India is still a federal country,” said Isaac.

He added that they may accept a proposal in the interim and have the issue examined under the dispute resolution mechanism.

“How can the Centre give us two options and force us to pick, when it is only a member? If there is dispute between the Centre and states, the Constitution allows us to have a dispute resolution mechanism. These are all possibilities,” he added. There has so far been no taker for the second option proposed by the Centre of states borrowing Rs 2.35 trillion. Manipur, the only state that had earlier opted for this option, changed its stance to favour the RBI window. Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal are yet to respond. Most of them are opposed to the two offers.

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