Borrow from RBI to bridge GST gap, Centre tells States

Presentation 62

At the meeting of the GST Council, the Center differentiated between the disparity induced by GST adoption itself — arguing that this is the “hardwired” section of insurance legislation — and that induced by COVID-19’s effect. Thursday’s Center agreed that states are likely to face this year a GST revenue deficit of some 3 lakh crore, as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman called an unexpected “act of Nature.” At the meeting, there was no debate on boosting tax rates. It proposed two alternatives for the Member States to borrow to cover the deficit, and gave them seven days to evaluate the plan. Alleging a “deficit in confidence” between Center and States. The Finance Minister described this 97,000 crore as “the purely hardwired portion of the [Compensation] Act.”

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