Kerala has rejected the two options for Goods and Services Tax (GST) compensation mooted by the Centre at the 41st GST Council meeting<\/a> earlier this week. Instead the State has asked the Centre to take a loan<\/a> and provide compensation to the States.<\/p>\n \u201cWe have decided to inform the Centre in writing that the State cannot agree to the two options put forward in the GST Council on August 27. Kerala wants the Centre to take a loan and provide GST compensation and this has the approval of Chief Minister Pinarayi Vijayan and other Ministers,\u201d Finance Minister T.M. Thomas Issac told a press conference here on Saturday.<\/p>\n Also read | States can borrow without hurting economy<\/a><\/p>\n Under the two options put forward at the Council meeting, the first was a special window for States, in consultation with the RBI, to borrow [collectively] \u20b997,000 crore at a reasonable interest rate. The second option was to borrow the entire \u20b92.35 lakh crore shortfall under the special window.<\/p>\n The Centre acknowledged that the States are likely to face a GST revenue gap of \u20b93 lakh crore this year as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman termed an unforeseen \u201cact of God\u201d.<\/p>\n At the GST Council meet, the Centre had distinguished between the shortfall due to GST implementation itself \u2014 claiming that this is the portion \u201chardwired\u201d into the compensation law \u2014 and that caused by the impact of COVID-19.<\/p>\n Lashing out at the Centre for \u201cbetraying\u201d the States and the two options mooted, Dr. Issac said the proposals would lead to a financial loss for the State.<\/p>\n Also read |\u00a0Centre unable to pay GST dues to States: Union Finance Secretary<\/a><\/p>\n \u201cThis shows the mindset of the Centre. It could have been resolved easily. But, the Centre has made it a big issue of the federal system. Even in the GST Council, except two BJP-ruled States, all other States wanted the Centre to take a loan and disburse it to them. The views of the States in the GST Council were ignored,\u201d Dr. Issac said.<\/p>\n He said Kerala would take the lead to arrive at a consensus on the issue by holding discussions with other States. Already, talks had been held with Finance Ministers of other States and the response was encouraging, he added.\u00a0<\/p>\n \u201cA video conference will be held with other State Finance Ministers on Monday afternoon. A separate memorandum will be submitted by the States. But, we are trying to reach a common ground and ask the Centre to avail loan to provide GST compensation. It is not clear if the BJP ruled States will stick to their stance. A unified stand will be aired in the GST Council,\u201d Dr. Issac said. <\/p>\n