"My Compliments": Chidambaram Backs States' Refusal To Borrow In GST Row

Congress MP P Chidambaram has congratulated the 10 states that "stood firm and rejected" the central government's suggestion they borrow money to offset GST compensation due to them - a subject that has emerged as a sore spot between a cash-strapped centre and state/UT governments.

In a series of tweets posted Tuesday afternoon, Mr Chidambaram (who served as Union Finance Minister in the Congress-led UPA government) said that because it was the centre that was liable to pay, "naturally the onus of finding the resources also falls on the central government".

"I compliment the nine or 10 states that stood firm and rejected the two options given by the centre to bridge the gap in GST compensation cess. Liability to provide GST compensation to the full extent falls on the centre as reluctantly admitted by the Finance Minister yesterday," Mr Chidambaram tweeted.

I compliment the 9-10 states that stood firm and rejected the two options given by the central government to bridge the gap in the GST compensation cess

— P. Chidambaram (@PChidambaram_IN) October 6, 2020

"Naturally, the onus of finding the resources also falls on the centre. It is unfair and unjust to ask states to borrow the money. States must stand firm at the next meeting on October 12," he added.

It is unfair and unjust to ask state governments to borrow the money. States must stand firm at the next meeting on 12th October

— P. Chidambaram (@PChidambaram_IN) October 6, 2020

Late Monday night, after a marathon meeting of the 42nd GST Council, Finance Minister Nirmala Sitharaman said no consensus had been reached on mode of repayment of total compensation due - around Rs 97,000 crore (rising to Rs 2.35 lakh crore including Covid-related relief).

A decision on this matter was deferred till the next meeting on October 12. The Council did, however, release Rs 20,000 crore as GST compensation due for this year.

At yesterday's meeting, held via video conference because of the pandemic, around 10 states once again refused the centre's suggestion that they borrow to settle dues. Twenty-one states (Puducherry was the only Congress-ruled state in this list) accepted one of the two borrowing proposals.

The opposing states said their refusal was a matter of law and not majority in parliament - a swipe at the ruling BJP that has been criticised for forcing bills through parliament with superior numbers.

States that have opposed the borrowing proposal include those ruled by the Congress (which has accused the centre of sovereign default) and Kerala and Bengal. Several of them earlier wrote to Prime Minister Narendra Modi on this issue, reminding him of "constitutional responsibilities".

In an earlier meeting the Council had said states could borrow money in lieu of compensation due - either Rs 97,000 crore or the full Rs 2.35 lakh crore. State governments critical of this proposal said the repayment of these loans would only add stress to already fragile economies.

Ahead of Monday's meeting Mr Chidambaram tweeted: "States must stand firm on the rejection of the two meaningless options... and insist the centre find the money and pay the promised compensation".