The Big Picture - GST Shortfall: Centre to Borrow

In what appears to be a relief for the states, the Centre has said it will borrow up to Rs 1.1 trillion, which is the estimated revenue shortfall on account of implementing goods and services tax. The centre will then lend the money to the states under a special window. The extra fund raising was reflected in the borrowing calendar released by the RBI and the finance ministry. The Centre borrowing on behalf of states is likely to ensure that a single rate of borrowing is charged and this would also be easy to administer. In this edition of the Big Picture we will analyse the issue of GST compensation shortfall.

Guests:
1. Shrikant Baldi, Former Chief Secretary, Himachal Pradesh
2. Prof. Charan Singh, CEO, EGROW Foundation
3. A. K. Bhattacharya, Editorial Director, Business Standard

Anchor: Frank Rausan Pereira

Producer: Sagheer Ahmad

[atharvak]

Long term solutions:
1. Make Permanent fiscal council
2. Estb debt management authority
3. GST council should be strengthened
4. State must be pragmatic and accept that 14% growth rate is impractical, due COVID, and then settle for 10% growth rate compensation.
5. Estb Dispute resolution body (system within the GST council framework where States and centre will meet and resolve) (True federal character)
6. Local Bodies, constitutionally empowered, can borrow on their own, permit them and state must be also incentivised to make them responsible for collection of GST.
7. State and centre to work together irrespective of political compulsions to achieve economic growth and not indulge in mere blame game.

[davidsarkar]

That's what we need.
RSTV always resolve our problem and showing the path of true journalism free of bias, shouting and yellow journalism.

[truewanderers]

Quite informative discussion..good panelist and good anchor as usual...rstv stands out for quality..

[aditikhandelwal]

This is one of my favourite YouTube Channel, especially The BIg Picture Playlist.

[DD-rulw]

Takeaways
• In a sharp retraction of its earlier position, the Finance Ministry Thursday said the Centre would borrow from the market to pay the GST compensation shortfall of Rs 1.1 lakh crore to states, and then act as an intermediary to arrange back-to-back loans to state governments.
• The amount borrowed will be passed on to the states as "back-to-back loan in lieu of
GST compensation cess" releases, said the finance ministry. This borrowing will not have any impact on the fiscal deficit of the government. The amount will be reflected as the capital receipts of the state governments and as part of financing of its respective fiscal deficits, said the finance ministry. The Centre borrowing on behalf of states is likely to ensure that a single rate of borrowing is charged and this would also be easy to administer.
• The general government (states + centre) borrowings will not increase because of this, as the states that get the benefit from the special window are likely to borrow a considerably lesser amount from the additional borrowing facility of 2 percent of gross state domestic product (from 3 percent to 5 percent) under the Aatma Nirbhar Package, the statement said.
• A senior Finance Ministry official said the back-to-back loan would be similar to the way funding from multilateral institutions such as the World Bank and Asian Development Bank is routed to states, where the Centre borrows and then lends to states. “So instead of states taking small loans, one big loan will be taken by the Centre and distributed to states on the exact same terms. Whatever interest rate the Centre borrows on, the same rate will be passed on to the states, ” the official said.
• During the meeting in August, the Centre presented two options before states to meet the GST shortfall. The two options before states were —
o A special window can be provided to the states, in consultation with the Reserve Bank of India, at a reasonable interest rate for borrowing of ₹1.1 lakh crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection. The GST panel had increased the borrowing limit of ₹1.1 lakh crore instead of ₹97, 000 crore on Monday.
o The second option is to borrow the entire ₹2.35 lakh crore shortfall under the special window.
o The government will provide a further relaxation of 0.5% in states' borrowing limit under FRBM Act as second leg of the first option, said finance minister.
Way forward
• Independent fiscal committee.
• Debt managment authority, Debt should be seprated from fiscal management.
• GST council should be strenghtened. A true resolution of issues should be done within the council.
• 14% growth rate in GST revenue is impractical post pandemic.
• Local bodies should borrow.
• Improve the GDP
• Telegram Channel: iassimplifiedchannel

[rohankalal]

Congratulations on reaching 5 million subscribers 😊🤗

[Rahulpriye]

Estimating the future expenditure at a time like this when we are still facing with the pandemic is little difficult. Time has now came really that the borrowing should be kept outside the preview of fiscal policy. Moreover, certain mechanism for consensus must be there in the GST council meeting so that proper management of the GST would happen which will ultimately strengthen the federal structure of our country.

[ThePatriotsIndia]

How many of you preparing for upsc cse

[OASHUB]

Rather than GST compensation cess, we must have a minimum tax like 100 Or 500 on all not coming under tax slabs and renegotiate with state on GST rate of growth and shares....

[manishbhawsar]

Frank Sir, Jocket look and colour is very good.

[lavlendrajaiswal]

this should have happened months before.

[pabankumar]

Kl sam s jb s m hospetl m amrjense m bhrte huaa ho drd s tdp rha tdpta rha or hmare repot teyar ajnbe n teyar keh os ko kat k stey hmare bade s drd s srer ka aksr s she stey repot teyar krk hmko hmare repot de jay or kese ko nhe doktr sahbko aads deya jay

[pabankumar]

F i r drj hona h repot hmr anusar teyar ke jay agr koe kse bhe glt repot lekhan ke chhaht lkr aata h koe bhe turt arst gerptar hot odr arst odr asked hot odr

[pabankumar]

Jo glt repotdr krbae h jesn os arst jesn ea lekh baya h apn aap lge h es kmen ko gerptar kr lo arst ketn lakh m khreda h f i r drj

[pabankumar]

Aksr k lea doktro je s kho suam bulakr aksra kr hmar sath or koe nhe h ks krna h bo aap jan othak l jao odr hot pda ho

[naveenbkgowda_malenadu]

By 2022 GST shd be scrapped for good center states relations & to strengthen federalism