Some Opposition-ruled states will take a call on Friday on approaching the Supreme Court on the issue of the Centre pressing states to borrow to meet the deficit in GST compensation cess fund.
Kerala finance minister Thomas Isaac told that chief minister Pinarayi Vijayan will consult law department officials on Friday to decide on the legal position to be taken on the matter “and we will see that seven to eight states would be approaching the Supreme Court”.
V Narayanasamy, chief minister of Puducherry, said, “States have already begun discussions… It will have to be a collective decision.”
These states could create a common front against the Centre’s proposals, even as unconditional additional open market borrowing has been enabled for 21 states.
Non-BJP-ruled states Maharashtra and Tamil Nadu have opted for a component of one of the options that the Centre had given to states to make up for the compensation shortfall, entailing borrowing Rs 1.1 lakh crore under the special borrowing window that the Centre will provide along with the Reserve Bank of India.
This leaves six states and one Union Territory – Punjab, West Bengal, Chhattisgarh, Rajasthan, Kerala, Jharkhand and Puducherry – that have yet to exercise the option.
Goods and services tax revenues and compensation cess, levied on luxury and sin goods, collections have been hit by the Covid induced slowdown.
The finance ministry on Wednesday permitted Tamil Nadu to raise an additional amount of Rs 9,627 crore through open market borrowings, after the state formally communicated its acceptance for borrowing under option one to meet the shortfall arising out of GST implementation.
On Tuesday, the Centre had allowed 20 states to raise Rs 68,825 crore through open market borrowings to meet the shortfall in the compensation cess.
Unconditional borrowing of 0.5% of gross state domestic product (GSDP) is allowed to states that opt for option one. This is separate from the borrowing of Rs 1.1 lakh crore envisaged for meeting the compensation shortfall.
With 21 states and UTs of Delhi and Jammu & Kashmir having chosen to take the loan amount under Option 1, the total amount under additional borrowing rises to Rs 78,542 crore.
However, Opposition-ruled states are set to take recourse to legal route.
Isaac said the Centre’s decision to allow some states to begin borrowing under the additional limits was “hypocritical” since Kerala had demanded that the relaxation should be given to all states and not be subject to any conditions.