COVID-19 and the lockdown restrictions that had to be put in place to prevent mass spread of the disease have taken its toll from the pocket of a common person to the highest levels of the bureaucracy.
Since the collections of the Goods and Services Tax (GST) have not been sufficient, the GST Council Meeting in its third consecutive day of session, under the leadership of Finance Minister Nirmala Sitharaman, offered the states an option to raise loans to meet the shortfall.
The loans will be on the name of states.
The twenty states are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand.
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It is worth noting that the opposition-led states were against this option and the implementation of the same may strain the relations between the centre and the state.
Another bone of contention is the legality of the move by the centre i.e. is the GST Council authorized and permitted for such an action.
The primary dispute is that the centre borrows under its own name and then transfers the funds to the states.
Some noteworthy responses include those from Chhattisgarh Finance Minister T.S. Singh Deo, who says, “Amid such critical conditions when the state govts need a helping hand from central govt, it is not only withholding the resources but also suggesting unacceptable methods to provide compensation,”
The Central Govt is backtracking from its own decisions and amendments to the GST compensation drafted for states during the 10th GST council meet held on 18th February 2017 (3/4) pic.twitter.com/MYsfTR0SmE
— TS Singh Deo (@TS_SinghDeo) October 13, 2020
Another fallout could be a legal tussle between the central and state governments.
M. Govinda Rao, member of the Fourteenth Finance Commission and former director of the National Institute of Public Finance and Policy, said the central government’s actions will have long-term consequences, besides the fact that many of the states could decide to take the central government to court.
“It will damage the fabric of Union-state relations. There was so much camaraderie in the GST Council and no decision was taken along party lines. In the future, whenever there is a serious problem, there is a risk that decision will be taken along party lines,” he said.