Ziraat Times Team Report
SRINAGAR: At the 41st GST Council meeting, Jammu & Kashmir’s passive positioning about revenue generation through GST system and market borrowing has yet again, according to observers, highlighted its difficult dilemmas in the current situation.
Three things are clear in the present circumstances: One, Jammu & Kashmir is neither in a position to meet its revenue generation targets for this fiscal, nor is it likely to receive the central tax devolutions to the tune estimated earlier.
Two, J&K has barely any options other than resorting to further market borrowings to meet its statutory budget commitments as business environment in J&K is badly damaged and planned revenue are quite difficult to come by.
Three, the borrowing is going to come at a significant cost for J&K, given that the former state cannot go for market borrowing directly without centre’s facilitation.
“When J&K attended the 41st meeting of GST Council its positioning made it clear that its choices are limited. As a union territory, it has barely any bargaining chips with the centre while it needs financial resources as well”, a highly placed official told Ziraat Times.
Pertinently, Centre on Thursday offered two options to states to compensate them amid inadequate cess collections under the goods and services tax (GST) regime. One was an offer of a special window to states, in consultation with the Reserve Bank of India (RBI), to the tune of Rs 95,000 crore at a reasonable interest rate.
The other was for states to borrow Rs 2.35 trillion from the market, with the RBI as a facilitator.
However, the burden of repayment is said not to be on states. The timeline for cess imposed on sin and luxury goods will be extended beyond June 30, 2022 (up to which states are Constitutionally guaranteed compensation), to help service the debt.
Minister Nirmala Sitharaman told the media after the meeting that the Centre would facilitate the borrowing, by talking to the RBI. This is to ensure individual states do not rush to the market and raise bond yields.