The Goods and Services Tax (GST) Council will examine the legal implications of borrowing from the market to meet the shortfall in funds to compensate states for their GST revenue loss. The borrowing of Council from the market is a compromise which aim at ensuring the state compensation needs are met at a time but details such as interest payment, loan repayment and the impact on the fiscal position of the government needs to be studied.
The impact of Fiscal Responsibility and Budget Management Act also needs to be studied. Central government paid ₹1.2 lakh crore to states as GST compensation although cess collected was about ₹78,000 crore. States like Kerala have been urging the union government to borrow from the market to pay GST compensation and extend the GST cess beyond 2022 to raise resources for repaying the debt.