For the future of Centre-state relations, the Centre should borrow to fund states’ GST loss. Do you agree with this view? Comment (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Building the consensus which culminated in the creation of the GST Council in 2017 to levy GST — a unified domestic consumption tax — was hailed as a great example of cooperative federalism. The states had agreed to join in the reform even as it involved sacrificing their fiscal autonomy.
· Concerned with their Central Sales Tax compensation experience, states wanted a firm assurance from the Centre. The minutes of the 7th and 8th GST Council meeting show that most of the states wanted the Centre to commit on paying compensation from the Consolidated Fund of India (CFI) .
· The payment of compensation has plunged the Union-state relationship to a new low. Besides the issue of compensation itself, the way the entire episode has been managed smacks of gaming and strategy in a period of crisis which does not augur well for the future of the Union-state relationship.
· Giving selective press statements from time to time by “officials” and “sources” to pressurise the states into accepting one or the other option does not infuse confidence.
· The issue is one of compensation to be paid to the states for which a solution must be found. It is the Centre’s commitment to find the compensation mechanism and borrowing is one of the options that must be discussed in the Council.
· Furthermore, if the commitment of the Centre is recognised as admitted by the finance minister in the 7th GST council meeting, given the relative fiscal strength of the Centre and the states and as the interest rate of the Centre’s borrowing is lower than that of the states, the Centre should take the responsibility to borrow.
