States denying Centre’s GST solution, likely to agree, Nirmala Sitharaman explains Centre’s borrowing for GST dues

Finance Minister Nirmala Sitharaman

The Union Finance Minister Nirmala Sitharaman writes a letter to States explaining the special window for borrowing Rs 1.1 lakh crore to meet the States’ shortfall in GST dues. The FM’s letter comes a day after Centre’s agreement to borrow the amount itself. This may likely see the agreement of the seven States which earlier dissented the Centre’s decision wherein States were asked to borrow.

Sitharaman, in her letter, explains the borrowing of Rs 1.1 lakh crore in the special window under Option-1 stating, “Based on suggestions from many states, it has been decided that the Central government will initially borrow the amount of Rs 1,10,208 crore and then dispatch the same back-to-back as loans to States. This will enable ease of coordination and simplicity in borrowing, apart from ensuring a favourable interest rate.”

Also Read: Ministry of Finance to go ‘paperless’ for Budget 2021

The former FM P Chidambaram called the move Centre’s ‘first correct step’ stating that this decision can become the base for re-establishment of trust with the Centre. In a tweet, he said, “FM has written to the states that the central government will borrow Rs 1,10,208 crore and give back-to-back loans to state governments. I welcomed the change of heart.”

Also Read: Govt of India provides Special Window to States for meeting GST shortfall

In another tweet, the former FM said, “States are opposed to borrowing on their own account. States are right. There is no difference between the first amount and the second amount. Centre must resolve the impasse immediately by offering the same terms for Rs 1,06,830 crore as it has now offered for Rs 1,10,208 crore.”

Also Read: GST Council reaches no consensus, 21 States nod to borrowing

However, with issuing the letter and agreement on the Centre’s borrowing, the seven states dissenting the Centre’s decision earlier are likely to come onboard. These seven states include – Chhattisgarh, Jharkhand, Kerala, Punjab, Rajasthan, Telangana, and West Bengal.

The four-paged letter by Nirmala Sitharaman lauded the constructive approach of the States in resolving the GST compensation dues issue.