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GST impasse: Rekindle trust between Centre and states, Mamata tells PM Modi

Asserts that Centre must borrow to meet GST shortfall at this critical hour of Covid-19 pandemic, says states will reciprocate

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Ishita Ayan Dutt  |  Kolkata 

Mamata Banerjee
Banerjee also pointed that the government of India had the power to monetise its debt while the states do not.

West Bengal Chief Minister Mamata Banerjee has sought Prime Minister Narendra Modi’s intervention in the goods and services tax (GST) compensation impasse.

In a letter to Prime Minister Modi, Banerjee said the Centre must borrow to meet the GST shortfall at this critical hour of Covid-19 pandemic.

“I am sure that the states will reciprocate in supporting a resolution that cess collection continues beyond the five years till the entire debt of the Centre is totally liquidated, along with the entire interest payment cost,” she said.

Banerjee also pointed that the government of India had the power to monetise its debt while the states do not.

ALSO READ: The GST is at a crossroads, it needs a political fix, not a legal one

“Also, government of India gets a much lower interest on such borrowings by state would be much higher. Furthermore, government of India can raise the resources to service its debt, while the states simply cannot service huge additional debts when their finances are on the verge of collapse,” the letter further said.

The states are being thrust two unilateral options, both of which require the states to borrow lakhs and crores of rupees, when many of them are unable to pay salaries to their employees and some even default on pensions to their senior citizen employees, she said.

On Sunday, West Bengal rejected the twin propositions from the Centre to meet the GST shortfall. The options were either to borrow via a special window to be facilitated through the Reserve Bank of India (RBI), or raise debt from the market.

ALSO READ: CM Bhupesh Baghel demands Rs 2,828 Cr from Centre as GST compensation

Six states – Kerala, Telengana, Chhattisgarh, Delhi, Punjab and West Bengal – had a video conference meeting on Monday to chalk out a strategy while some wrote to the Prime Minister and Union Finance Minister expressing disapproval on the options proposed by the Centre.

Banerjee urged the Prime Minister to rekindle the trust between the Centre and states at the GST Council – a trust held for over three years and 40 meetings of the Council despite occasional differences on merits, cutting across party lines.

She also reminded that when the consensus was arrived at between all the finance ministers of the country across political parties and the Centre that Parliament shall compensate the states for five years, there was no legalistic approach taken by bringing in AG (Attorney General), since it was a matter of trust with full cooperation between the states and the Centre.

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First Published: Wed, September 02 2020. 16:42 IST
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