‘No Consensus on How to Make Up for GST Shortfall’: FM Sitharaman

The meeting was held to discuss the contentious issue of GST compensation.

2 min read
Finance Minister Nirmala Sitharaman. 

Addressing the media after chairing the GST Council meeting held on Monday, 12 October, Finance Minister Nirmala Sitharaman said that ‘no consensus was arrived at’ on the way to make up for GST shortfall of states.

The centre cannot borrow to make up for the shortfall of states as it will lead to rise in borrowing cost, Sitharaman pointed out.

"The states asked some specific clarifications, which were given. Many of the clarifications were on the Attorney General's opinion on borrowing, GST Council's authority to extend cess collection beyond five years," she was quoted as saying, after the GST Council meeting

“The collection of cess is inadequate for paying compensation. This is absolutely apparent for everyone to see and because it is something which was never envisaged, the shortfall will be now be met by (states) borrowing.”
Nirmala Sitharaman, as quoted by ANI

12 States Accepted Centre’s Proposal, 9 Didn’t

After Thursday’s meeting, while 12 states accepted the centre’s proposal to borrow from the markets, nine others placed the onus of borrowing on the Government of India, with the finance minister seeking time to consider the latter's demands, reported NDTV.

"States borrowing does not mean a chaotic situation. We will facilitate states so that some states end up paying high-interest rates while others obtain loans at a reasonable rate," Sitharaman further said, during the briefing late on Monday.

‘Illegal’: Kerala Finance Minister

Kerala Finance Minister took to Twitter to say that the announcement made by Sitharaman to permit 21 states to borrow as per option one was illegal.

“It is unfortunate that Union FM does not propose a decision in the Council or even make a statement what she is going to do but choose to make the announcement in the press conference. Why does Centre refuse to take a decision in Council? Total disregard for democratic norms,” he tweeted.


The meeting – which saw the participation of Minister of State Anurag Thakur, along with the finance ministers of states and Union territories – was held to discuss the contentious issue of GST compensation.

This was the third time the council met to discuss the issue of funding the shortfall of Goods and Services Tax (GST) revenue of states.

In order to fill the gap, during a meeting in August, the Centre had given two options of borrowing to the states. One, borrow Rs 97,000 crore from a special window facilitated by the RBI. Two, borrow the entire expected shortfall of Rs 2,35,000 crore this year.

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