Mumbai: Against the backdrop of a cumulative reduction of a record 31% in GST collection from April to August and 15% alone this month as on August 28, the Maharashtra Government will soon decide on two options offered by the Centre to meet the GST compensation shortfall.
One of the options is a Rs 97,000 crore central bank window and another is that states borrow Rs 2.35 crore –the estimated GST revenue loss due to Covid-19 led slowdown and the GST transition- from markets facilitated by the Centre and the RBI.
Senior Officer at the State Finance Department told Free Press Journal, ‘’The government has been pursuing with the Centre for an early clearance of dues worth Rs 22,534 crore comprising Inter GST share and compensation. According to the options given, the states will have to raise debt through bonds at the prevailing interest rates in the market. The government will take decision based on how much it can mobilise, at what interest rate and who will bear the responsibility of repayment and later convey it to the Centre.’’ He informed that the state government is expected to report a shortfall of almost Rs 40,000 crore in GST collection and another Rs 30,000 crore in the shortfall of other taxes including stamp duty and registration fee, Excise Duty and Motor Vehicle Tax.
The officer said in both the options there will be 100% borrowings by the state government. ‘’One has to see the state government’s capacity to borrow and repay considering the present slowdown,’’ he noted.
These options are completely different from what the Maharashtra Deputy Chief Minister Ajit Pawar, who holds the finance and planning department, had suggested at the 41st GST Council meeting. As reported by Free Press Journal, Pawar had urged the Centre to borrow the loans at the lower interest rate and pay the compensation. Pawar further said that the Centre’s pro-active measures are necessary to help Maharashtra and other states whose finances were hit hard because of Covid-19 crisis and slump in the economy.
The state has incurred a revenue shortfall of Rs 25,046 crore by end of July as it has mobilized Rs 61,150 crore against Rs 87,196 crore last year. To tide over the cash crunch, the government has already raised debt worth Rs 30,000 crore against Rs 10,000 crore last year till July.
The state government in the annual budget for 2020-21 had estimated total revenue collection of Rs 3,47,456 crore. However, because of economic downturn and lockdown effect, the government expects the reduction in revenue collection at Rs 2,55,000 comprising revenue of Rs 1,80,000 crore through taxes and fees and Rs debt worth Rs 75,000 crore.
The state government has cited that it will not be possible to keep revenue expenditure below Rs 3 lakh crore as it has to spend a whopping Rs 2,55,000 crore alone on wages, pension, interest payment, loan repayment and other committed expenses.