GST Transition and the revival from the ongoing COVID-19 crisis The central government is seeking to convince various states that borrowing from the markets is viable in order to meet the shortfall of goods and services tax (GST) compensation. It will create a room for the federal government to elevate funds in the event of escalating antagonism with China, thus providing a method to aid the pandemic hit the economy.
In lieu of the Fiscal Responsibility and Budget Management (FRBM) Act, it is observed that the borrowing level of the states is below the mandated level due to which the states are well prepared to raise funds from the markets. With the knowledge about the matter, the officials also reported that the states have almost Rs 2 lakh crore parked in their treasury bills. The top government officials said that the centre is trying their level best to boost the economy and that the states should also contribute to the well-being.
It is guaranteed the centre will honour their commitments of compensating states fully for the loss they will face on account of goods and services tax (GST) transition and the loss of revenue the states have incurred due to the COVID 19 pandemic slump. The centre will fulfill all these commitments in spirit and letter. The states will be given the remaining amount by the centre, even after borrowing Rs 97000 crore. The remaining amount will be paid to them only after the full repayment of the borrowings. However, the credit to the private sector will be denied if the entire shortfall of the states is borrowed.
The debt window would be packaged in a way to ensure the states are independent altogether. The loan will be provided at the same rate, thus removing the angst among some states that feel they are getting a lower rate than others.