<p>West Bengal Finance Minister Amit Mitra has asked his union counterpart Nirmala Sitharaman to call an urgent GST Council meeting to discuss further the GST compensation mechanism as many states, including his own, were reeling under an acute fiscal shortage.</p>.<p>In a letter to Sitharaman, he said West Bengal has opted for Centre’s new proposal whereby it agreed to borrow money from the market to compensate the states for their GST shortfall. However, the Centre’s proposal that it will borrow only to the extent of two-thirds of compensation due to the federal bodies, was not agreeable to the state.</p>.<p>The remaining amount, the Centre had said, should be raised by states themselves on easy loan terms and the Centre would compensate for that by 2022.</p>.<p>Mitra, however, urged that the remaining one-third of potential shortfall of Rs 72,000 to states should also be borrowed by the Centre and compensated to states by January next year itself.</p>.<p>“Needless to say, we sincerely urge you to borrow the remaining one-third of the potential shortfall (Rs 72,000 crores) as was suggested in GST council meeting in earlier letters and conversations,” Mitra said in the letter and sought Sitharaman convene a GST Council meeting at the earliest to discuss the matter.</p>.<p>Mitra said there was a huge differential in interest rates when it comes to borrowing by states. While the Centre is able to borrow from the special window at 5%, the states have to pay 6.8% rate of interest.</p>.<p>“In other words, by asking the states to borrow one-third of the potential compensation funds from the competitive auction market of the RBI, a lot more debt servicing burden will be generated for the states to be paid from Cess collection,” Mitra said.</p>.<p>He said that due to the pandemic and cyclone Amphan which battered West Bengal, the state is already in acute financial stress. Therefore, the Centre must call a GST Council meeting for a unanimous decision.</p>
<p>West Bengal Finance Minister Amit Mitra has asked his union counterpart Nirmala Sitharaman to call an urgent GST Council meeting to discuss further the GST compensation mechanism as many states, including his own, were reeling under an acute fiscal shortage.</p>.<p>In a letter to Sitharaman, he said West Bengal has opted for Centre’s new proposal whereby it agreed to borrow money from the market to compensate the states for their GST shortfall. However, the Centre’s proposal that it will borrow only to the extent of two-thirds of compensation due to the federal bodies, was not agreeable to the state.</p>.<p>The remaining amount, the Centre had said, should be raised by states themselves on easy loan terms and the Centre would compensate for that by 2022.</p>.<p>Mitra, however, urged that the remaining one-third of potential shortfall of Rs 72,000 to states should also be borrowed by the Centre and compensated to states by January next year itself.</p>.<p>“Needless to say, we sincerely urge you to borrow the remaining one-third of the potential shortfall (Rs 72,000 crores) as was suggested in GST council meeting in earlier letters and conversations,” Mitra said in the letter and sought Sitharaman convene a GST Council meeting at the earliest to discuss the matter.</p>.<p>Mitra said there was a huge differential in interest rates when it comes to borrowing by states. While the Centre is able to borrow from the special window at 5%, the states have to pay 6.8% rate of interest.</p>.<p>“In other words, by asking the states to borrow one-third of the potential compensation funds from the competitive auction market of the RBI, a lot more debt servicing burden will be generated for the states to be paid from Cess collection,” Mitra said.</p>.<p>He said that due to the pandemic and cyclone Amphan which battered West Bengal, the state is already in acute financial stress. Therefore, the Centre must call a GST Council meeting for a unanimous decision.</p>