Asking States to borrow is skewed idea: Deve Gowda on GST shortfall

Bengaluru: Former prime minister H D Deve Gowda on Sunday termed as a “skewed idea” the Centre’s suggestion that states can go for borrowing to make up for the GST shortfall and said it cannot be seen shirking its responsibility.

The JD(S) patriarch also said that the GST Council meeting held last week appeared to have further disturbed the already delicate relationship between the states and the central government.

“The Centre’s suggestion that the States should borrow to make good the expected shortfall of Rs 2.35 lakh crore in GST compensation this year has, expectedly, not gone down well,” Gowda said in a statement.

Noting that the states were already under a financial strain, he said “To ask the states to borrow is a skewed idea” because in July 2017 they had given up their right to levy taxes and had allowed the Goods and Services Tax (GST) regime.

“They had agreed to do so because the central government had assured to adequately compensate them. I tend to agree with the argument that the onus is on the Centre to borrow and compensate the States. It cannot be seen shirking this responsibility,” he said.

The Centre on Saturday wrote to States suggesting options of borrowing money to make up for the Rs 2.35 lakh crore shortfall in GST revenues expected in the ongoing fiscal.

Two days after first making the suggestion at the GST Council meeting, the Finance Ministry wrote to State governments saying they could borrow either via a special window it will facilitate through the RBI or raise debt from the market.

Gowda said that besides the GST, the new formula for the devolution of taxes under the 15th Finance Commission had also created some disquiet.

Many progressive States feel that they contribute more to central taxes but receive much less in return, he added.

The Central government which has often spoken of ‘co-operative federalism’ should engage the States actively, and arrive at a consensus on all difficult matters, he said.

The States and the Centre being at loggerheads all too frequently does not augur well for our wellbeing as a nation, the former prime minister said.

The Finance Minister has spoken about the ‘Act of God,’ Gowda pointed out and said, “I agree with her. But, we cannot sit back and wait for God to set right the mess we often put ourselves in. As the proverbial saying goes, God helps those who help themselves.”

Finance Minister Nirmala Sitharaman has said the economy has been hit by the COVID-19 pandemic, which is an “Act of God” and it will see a contraction in the current fiscal.