43rd GST Council Meeting: Key Highlights

The 43^rd GST council meeting which was a continuation of the 42^nd GST council meeting, was held on October 12^th, 2020. This meeting was conducted to primarily discuss one agenda item, namely no. 9A.

The meeting was held via video conferencing under the chairmanship of Finance Minister Smt. Nirmala Sitharaman in the presence of Union Minister of State for Finance & Corporate Affairs, Shri. Anurag Thakur, Finance Ministers of States & UTs and Senior officers from Union Government & States.

Below are the key highlights of the 43rd GST Council meeting

• The 43rd GST Council meeting ended with no unanimity on the borrowing issue. Hence, no conclusion was reached. The states may go ahead with borrowing funds as per the options previously given
• The levy of compensation cess will continue beyond the 5-year period, as was announced in the 42nd GST Council meeting
• The centre will not be able to borrow funds to meet the compensation cess shortfall as this will result in an increase in the yield on G-sec bonds
• The Finance Minister explained that the Centre has issued a borrowing calendar, and if it goes beyond it to borrow, the G-Sec deals used as a benchmark for every other borrowing will go up. This will increase the borrowing costs for states and the private sector as well.

“There was no consensus arrived by the end of the meeting,” Finance Minister Nirmala Sitharaman said in a press conference. Sitharaman said that majority of the states have agreed option 1 where states can borrow up to Rs 1.1 lakh crore from a special window facilitated by the RBI. Other states are of the view that a consensus should be reached.

However, Sitharaman said that a lot of members discussed whether the Council has any authority to stop them from going and borrowing funds. “Whilst I respect there is no unanimity, can a member of the Council stop another state from what it wants to do?”

The finance minister said that if any states are ready to move forward with option 1 and borrow funds then she would be ready to engage with them.

Sitharaman said that just because a unanimous decision is not reached, it should not hold back states who are ready to borrow and are in need of money. “I don’t think anyone can disallow what states can do. There were views on why centre can’t borrow, to which a response was given. I don’t think the GST Council’s intent is to stop anybody,” the finance minister said.