The GST Council on Monday again failed to arrive at a consensus on how to compensate the states for the shortfall in collections.

But finance minister Nirmala Sitharaman appeared to charge the Opposition-ruled states for blocking those who want to take up borrowing option one to meet the shortfall.

“Does the collective conscience of the GST Council in its quest for unanimity, which I too strived for, allow us to hold back states which have opted for a borrowing option, saying we have to hold you back till a consensus is arrived at? I asked this to the members,” Sitharaman said after a five-hour council meeting.

She said the Centre would be ready to facilitate those states which have opted for option one and their borrowing rights cannot be held back by others.

The political slugfest continued to act as a stumbling block in arriving at a consensus as the 10 opposition states, including Bengal, Punjab and Chhattisgarh, have refused to go by the Centre’s proposals.

“The Centre has issued a borrowing calendar, if I go beyond that to borrow, the G-Sec deals which are used as a benchmark for every other borrowing will go up. This will increase borrowing costs for states and the private sector too,” the finance minister said. “An increased borrowed cost is not something we can afford at a time India is looking at more money to invest and to borrow to do business.”

Kerala finance minister Thomas Isaac slammed Sitharaman for her move to facilitate the borrowing for the BJP states and those who support the party on various issues.

In a tweet, Isaac said: “It is unfortunate that the Union FM does not propose a decision in the Council or even make a statement what she is going to do but chose to make the announcement in the press conference. Why does the Centre refuse to take a decision in the Council? Total disregard for democratic norms.”

“The Union FM’s announcement that she is going to permit 21 states to borrow under Option one is illegal. Option one involves deferment of compensation payment beyond five years for which a Council decision is necessary according to the AG’s opinion. No such decision has been made in the Council,” Isaac said in the tweet.

Bengal finance minister Amit Mitra was equally scathing of Sitharaman. “Today, will @nsitharaman with (PM) Modi’s direction ignore & muzzle views of 10 states at the GST Council, using brute majoritarianism? If she does, it will impart a death blow to cooperative federalism already on ventilator. Will today be marked a black day for India's democracy,” Mitra said in his tweet.

Rajat Bose, partner, Shardul Amarchand Mangaldas & Co, said: “A stalemate seems to be continuing on the issue of cess. The only certainty is that the levy of cess will continue beyond 2022 which means that eventually it is the consumers who will be funding the shortfall.”

M.S. Mani, senior director, Deloitte, said, “Businesses would be keenly waiting to know the period and the terms on which the compensation cess would be extended as that would have a significant bearing on their business plans.”

Sitharaman said that majority of the states have agreed on option one 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.