New Delhi, Aug 26 (IANS): A day ahead of the GST Council meet, Amit Mitra, the Finance Minister of West Bengal has written to Union Finance Minister Nirmala Sitharaman asking the Centre to pay GST compensation and said that the Union government cannot ask states to borrow from the market to meet the financial requirements.

The statement comes amid anticipation that the GST Council meeting on Thursday is likely to discuss a market borrowing mechanism to help states leverage recently enhanced borrowing limits to compensate them for revenue shortfalls and debts, to be eventually repaid from the compensation cess fund.

"Under no circumstances should states be asked to borrow from the market as it will increase their debt servicing liability. Further, it may lead to cut in state expenditure which is not desirable at this juncture when the economy is witnessing severe recessionary trend," the letter said.

Mitra suggested that Centre must pay from the different cesses it collects, as it is not getting devolved to the states.

He reminded the Finance Minister that in the 39th GST Council meeting, the Chairperson, Sitharaman herself had said that "the states are entitled to it and there is no question of them asking the Centre for it. It was the solemn commitment to the states. The Centre is duty-bound to give compensation to the states".

In the letter, he said: "We are greatly alarmed by the news emanating out of Delhi, especially the recent statement made by the Union Finance Secretary which was widely carried by all national dailies that the Central government is not in a position to pay GST compensation due to dip in collections meant for compensation."

Earlier, Attorney General K.K. Venugopal had also suggested to the government that the Council can recommend to the Centre to allow the states to borrow on the strength of the future receipts from the compensation fund. He also said that there is no obligation on the Centre to pay the GST compensation shortfall.