Chidambaram embraced GST Shortfall Management by Union; Wants Centre to ‘Re-establish Trust with States’

After Union government agreed to borrow Rs 1.10 lakh crore on behalf of states to meet the GST shortfall, Congress leader P Chidambaram said Friday that the Centre has taken the “correct first step” and it should now work to re-establish trust with them.

“States are opposed to borrowing on their own account. States are right. There is no difference between the first amount and the second amount,” Chidambaram said.

He asked the Centre to resolve the impasse immediately by offering the same terms for Rs 1,06,830 crore as it has now offered for Rs 1,10,208 crore. On Thursday, the central government announced that it will borrow up to Rs 1.10 lakh crore on behalf of the states to bridge the shortfall in GST collections.

A slowdown in the economy since last fiscal has resulted in a drop in the Goods and Services Tax (GST) collections, upsetting the budgets of states which had given up their right to levy local taxes such as sales tax or VAT when GST was introduced in July 2017. To make up for the shortfall, borrowing from the market was proposed but non-BJP states refused to accept the proposal and asked the Centre to borrow instead.