Amid demand for division in the GST Council over the issue of mechanism to compensate states, sources in the Union government said that voting could happen only in areas under the Council's jurisdiction and borrowing is not one of them.
The Council has jurisdiction to extend the levy of compensation cess to make up for shortfall in the compensation requirements of states and collections from the cess. "It has done that. Now the ball rests in the court of individual states, not the GST Council," a key source said.
The Council on Monday had extended the cess collection beyond June 30, 2022.
So far as the borrowing is concerned it is the individual decision of a state and the Centre, which squarely fall under article 293 of the Constitution.
"When something which is not under the jurisdiction of the GST Council, how can voting or division be permitted on the subject. Voting can occur in the GST Council only on those matters which are under the express jurisdiction of the GST Council," another source said.
The sources cited the Attorney General K K Venugopal's opinion to buttress their stand. AG, they said, had clearly opined that the states can borrow on the basis of future receipts of compensation and thus do not need GST Council's recommendation to raise loan.
"States actually and legally do not require permission of the GST Council to borrow. Therefore, division or no division, no one can prevent any state from borrowing," the source cited above said.
To elucidate his point, he said can Assam be prevented from borrowing, if Kerala does not want to borrow?
Borrowing options were given by the department of expenditure. The department negotiated it with the states and modified one of the options later. It is the department which was giving these options and not the council, they said.
The Centre had originally given two options to the states -- to borrow Rs 97,000 crore from a window to be facilitated by the Reserve Bank of India or to borrow Rs 2.35 trillion from the markets. After negotiating with the states, it raised the amount for the RBI window to Rs 1.10 trillion by taking GST revenue growth at 7 per cent against 10 per cent assumed earlier.
As many as 21 states had opted for the RBI, according to the finance ministry sources. However, around ten states opposed both the options and wanted the Centre to borrow instead.
The Centre requires the support of 20 states to pass a decision in the Council. However, sources say that voting cannot happen on this issue in the Council.
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