NEW DELHI: After five hours of intense engagement, the GST Council on Monday failed to settle the dispute over the compensation issue as the Centre refused to borrow on behalf of states to meet the revenue shortfall.
Sources said 10 non-BJP states rejected the finance ministry’s proposal that state governments borrow to meet the revenue shortfall and demanded a Group of Ministers be formed to settle the dispute. This was the third meeting in a row that discussed compensation shortfall without a decision.
However, Finance Minister Nirmala Sitharaman, who chaired the 43rd GST Council meeting through video-conferencing, claimed there was no dispute but only differences of opinion “I explained very clearly why the Centre cannot borrow. The Centre has issued a borrowing calendar. If I go beyond that to borrow, the G-Sec deals which are used as the benchmark for every other borrowing will go up. This will increase borrowing costs for states and the private sector, too,” she told reporters after the meeting.
The FM added that the 20-plus states that had opted to borrow to meet the GST revenue shortfall wanted to go ahead in view of the upcoming festive season.There was no immediate comment on the government’s next move.