GST Council may set up GoM on compensation shortfall

New Delhi: The Goods and Services Tax (GST) Council could consider setting up a group of ministers (GoM) to resolve the row over states having to borrow from the market in order to meet the shortfall in compensation. Apart from the two options that the Centre has offered to the states, a third has emerged, which proposes that they make such borrowings jointly, rather than states taking on the entire burden. Punjab has written to the Centre, asking for a GoM to resolve the issue. Kerala and Chhattisgarh have backed the demand.

“Why not set up a GoM to decide?” said Kerala finance minister Thomas Isaac. The issue of borrowing in lieu of GST compensation can be resolved within the GoM, as in the past, he said, adding that the council can also discuss the option of the Centre offering something additional to states, such as agreeing to take on some part of the total borrowing.

The council is scheduled to meet next on October 12 to deliberate on the matter. The government has offered two options to the states to meet the GST compensation deficit – borrow Rs 1.1 lakh crore to partially meet shortfall or borrow the entire Rs 2.35 crore deficit. The GST Council meeting on October 5 could not decide on these options, with 10 states and UTs strongly opposing them. A top official from an opposition-ruled state also backed the third option, with both Centre and states sharing some burden of the borrowing. “This (borrowing) could be in proportion to the vote share of states and the Centre (in the council),” the official said.


Chhattisgarh commercial taxes minister TS Singh Deo asked why a GoM couldn’t be set up, rather than forcing states to choose. “These suggestions could be looked at,” he said. Deo also dismissed the view that the council is not mandated to vote on borrowing proposals. If the proposal has been put to the council by the Centre in lieu of compensation due to states, how can it not be decided by that forum, he asked. Some states such as Uttar Pradesh have suggested revenue augmentation measures, including raising cess on gutka, he said.