The GST Council met for the third time on Monday over compensating the states for the shortfall in tax collections, PTI reported. Finance Minister Nirmala Sitharaman, who heads the Council, said the Centre cannot borrow and pay states for the shortfall.

According to her, if the Centre borrows any money, it will result in a rise in bond yields, which in turn would result in an increase of borrowing costs for the government and private sectors.

Monday’s meeting ended without reaching any consensus, as it happened in the last two meetings.

The Centre has been proposing the states to borrow against future GST collections to make up for the shortfall. The finance minister said that 21 states had agreed to take this suggestion.

However, other states insisted on a decision to be taken by consensus, she said.

“We were not able to arrive at a consensus,” Sitharaman said.

In its previous meeting last week, the Council had decided to extend the surcharge on taxes on luxury goods such as cars and tobacco products beyond June 2022 but failed to reach a consensus on ways to compensate states for loss of tax revenue.

The projected total compensation shortfall in the current fiscal stands at Rs 2.35 lakh crore.

As many as 21 states — which are BJP-ruled or have supported it on various issues — have opted to borrow Rs 1.10 lakh crore to meet the compensation shortfall.

The Centre has released Rs 20,000 crore to the states towards compensation shortfall so far in the current fiscal.