The 43rd GST Council meeting was held on 12 October 2020. It was an extension of the 42nd GST Council Meeting to decide on the borrowing options available to meet the compensation cess shortfall.However, the Council meeting ended without a consensus between the Centre and a few states.
The key points of discussion in the 43rd GST Council Meeting were:
The levy of compensation cess will extend beyond 5 years (beyond 2022). This was announced in the 42nd GST Council Meeting as well.
The Council clarified that the cess collected after July 2022 would be utilised solely for the repayment of interest and principal of the loan taken.
The Council also explained why the Centre would not be able to borrow funds on behalf of the states to meet the shortfall.
The states have been given the free-hand to go ahead and borrow funds as per the options provided in the 41st GST Council Meeting. The Council assures the required support in facilitating these borrowings. Interest rates will be looked into by the Council to ensure that no State has to pay an exorbitant amount as interest.
The Centre has already issued the borrowing calendar, and it cannot surpass it. If the Centre borrows more, the G-Sec deals which are used as a benchmark for every other borrowing will rise. This will in-turn increase the borrowing costs for states and the private sectors too.