View: There’s a compelling case for Centre to borrow to meet states’ GST shortfall

View: There’s a compelling case for Centre to borrow to meet states’ GST shortfall

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The key is for the Centre to accept that states are at the frontline of this economic battle, and urgently need access to additional resources, not just compensation for inadequate cess collections.

Synopsis

Markets would see immediately that the risk of default of state governments, with such a large rise in their liabilities, would be such that the creditworthiness of their ultimate guarantor — Government of India — would be called into question.

By Rathin RoyIn a meeting of the Goods and Services Tax (GST) Council on August 27, GoI has quantified the potential shortfall in the GST compensation cess. GoI has proposed that the states borrow to cover this shortfall.The public paper clearly presents GoI’s position. It accepts that compensation is payable for the entire shortfall. The paper also states that it is for the GST Council to decide how the shortfall is to be made good. This is

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