oppn parties GST Compensation Bonds Should Be Floated

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  • Allahabad HC said that the UP Police is acting as law unto themselves as they detained a person unlawfully even before his arrest
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  • Finance Minister Nirmala Sitharaman said India's trade imbalance with China was growing sharply and attributed the problem partly to restrictions on Indian goods and services entering the Chinese market. China subsequently said it was ready to work with India to address mutual economic and trade concerns; India's trade deficit with China reached $69 billion in the first half of FY2026–27, up 27% year-on-year
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  • India defeated Zimbabwe by four wickets in the opening women's T20 International in Raipur, taking a 1–0 lead in the three-match series. Deepti Sharma and Niki Prasad combined in an 82-run stand after India's top order collapsed, helping the hosts chase down Zimbabwe's total of 114 for five
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  • The Supreme Court of India upheld the Bombay High Court's decision quashing the 2020 write-off of ₹8,415 crore in additional tier-1 bonds issued by Yes Bank (Yes Bank). The court ruled that the bank's administrator lacked the authority to extinguish the bonds under the final reconstruction scheme, strengthening bondholders' claims
  • The Supreme Court issued notices to the Election Commission of India, Delhi Police and opposition leaders, including Rahul Gandhi and Akhilesh Yadav, in separate petitions concerning electoral-roll revision and protests held in Delhi on October 10–12. The court also directed the preservation of CCTV footage linked to allegations of police excesses
  • The Supreme Court ruled that a person converting from Hinduism to Islam cannot automatically claim backward-class reservation benefits in the new religious community solely on the basis of their previous caste status. The judgment upheld the Madras High Court's decision striking down a 2024 Tamil Nadu government order that permitted such certification for specified communities
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Delhi HC refuses to ban CJP's Tiranga rally at Central Park in Connaught Place today /////// Police says will control and regulate it /////// NDMC closes the park for the public on Friday and Saturday
oppn parties
GST Compensation Bonds Should Be Floated

By Sunil Garodia
First publised on 2020-10-06 11:30:33

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack

The GST Council meeting on Monday, October 5, was stormy as expected. But the sad part is that the current compensation dispute was not resolved. Instead, opposition ruled states alleged that when they raised the matter and demanded answers, finance secretary A B Pandey ended the meeting abruptly.

For the record, it was decided that compensation cess, through which the government had promised to pay the states for any shortfall in tax revenue for five years till 2022, will continue beyond that date to help the states recover their back dues due to the uncertain economic conditions.

The Centre also decided to release Rs 20000 crore immediately as the first tranche of compensation for the current year. It will also release another Rs 25000 crore next week to states that received less than their share of integrated GST in FY 2018. This will obviously provide some relief to some states as their finances are strained due to the pandemic.

Although one can understand that the pandemic has made things difficult for the Centre as funds have dried up due to low tax collections because of the slowdown in the economy and the lockdown which brought economic activities to a standstill, one still feels that as the head of the federal family, it is the duty of the Centre to find ways to get the money to compensate the states. The Centre has many more options than states to raise money.

Ideally, if GST collection is about Rs 1.25 lakh crore every month, all states will get their current dues cleared within a few months. But the collections are hovering between Rs 90000 and Rs 95000 crore, with no substantial improvement in sight. At this rate, there will continue to be a shortfall of Rs 30000 crore every month. Together with the current shortfall, it will add up to a huge amount in the next few months and is likely to bring development funding to a standstill in many states. The Centre must find a way out, and soon.

Extraordinary (act of God) situations need extraordinary solutions. A special shortfall recovery mechanism, say a three-year GST Compensation Bond bearing an interest rate of 4 percent (slightly more than the reverse repo rate at which banks are parking their excess funds with the RBI) can be floated. Banks should be made to invest in these funds. The states should be compensated with the proceeds. The bonds should be redeemed from the collections of the GST compensation cess. Ideally, 33 percent of the bonds should be redeemed every year to reduce the interest burden. If banks have to be provided liquidity earlier, 15 percent can be redeemed every 6 months. This will ensure that neither the Centre nor the states will be unduly stressed for funds and banks will get more than what they are now getting by parking funds with the RBI

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