InvestorQ : What is the reaction of the state governments to the central government offer to borrow to bridge their GST revenue gaps?
NISHA Nayak made post

What is the reaction of the state governments to the central government offer to borrow to bridge their GST revenue gaps?

Answer
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Priyanka N answered.
4 weeks ago


It may be recollected that when the GST Council meeting was chaired by Nirmala Sitharaman on 27 August, the issue of compensation to states had come up. At that time, Nirmala Sitharaman had suggested that states borrow the deficit with central guarantee.

Most of the states at that point of time had asked for 7 days time to revert on the subject as borrowings would be difficult and would enhance their fiscal deficit at a state level. However, the first voice of disagreement has come from the state of West Bengal.

Mamata Banerjee has written to the central government outright rejecting the centre’s proposal for states to borrow from the market to meet the revenue shortfall. The WB government is the first to openly object to this move of the centre.

It may be recollected that as per the GST Act, the centre is obliged to compensate the state for any revenue shortfall. However, the centre has argued that these are exceptional circumstance and hence normal situation arguments cannot be offered here.