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Published On: Mon, Oct 5th, 2020

GST Council meet: Govt to disburse compensation cess worth Rs 20K cr to all states tonight

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bloombergquint_2020-10_91932030-e5d5-4a52-8f1d-f6d70e0e623e_EjiwMq_VgAAaUr6NEW DELHI : GST compensation due to state governments for this year around Rs 20,000 crore – will be released tonight, Finance Minister Nirmala Sitharaman said Monday after a marathon meeting of the 42nd GST Council.
The Council, however, failed to provide a consensus on mode of repayment of total compensation – around Rs 97,000 crore (rising to Rs 2.35 lakh crore including Covid-related relief). A decision on this matter has been deferred till the next meeting on October 12..
Briefing reporters after the GST meeting, Sitharaman said that the GST Council has taken up the long-pending issue of Integrated Goods and Services Tax.
“10 states demand that full compensation should be paid to the states during the current year as per clauses in the law and centre should borrow. Decision was postponed to the next meeting on 12th of October,” Kerala finance minister Thomas Isaac said.
“Entire compensation is going to be paid back to the states. The compensation shortfall which has arisen due to GST implementation or due to COVID19 is all going to be given back to the states,” assured finance minister.
The two options before states were 1) A special window can be provided to the states, in consultation with the Reserve Bank of India, at a reasonable interest rate for borrowing of Rs 97,000 crore.
The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection. The GST panel had increased the borrowing limit of ₹1.1 lakh crore instead of Rs 97,000 crore on Monday. 2) The second option is to borrow the entire Rs 2.35 lakh crore shortfall under the special window.
While at least 21 states, mostly ruled by BJP or parties which have supported it on issues, had till mid-September opted to borrow Rs 97,000 crore to meet the GST revenue shortfall in the current fiscal, opposition-led states like West Bengal, Punjab and Kerala have not yet accepted the borrowing option given by the Centre. “The states who have not written to the Prime Minister wanted the centre to borrow,” the minister said.
They dissenting states expect the Centre to borrow and compensate them. Kerala, Punjab and Delhi have asked for a dispute resolution mechanism to handle such differences.

GST compensation has emerged as a sore point with state and union territory governments this year, particularly with the adverse economic impact of the Covid pandemic and lockdown.
The centre is finding it difficult to pay states compensation – due if a state’s revenue grows slower than 14 per cent – because states have not earned much this year due to months of lockdown necessitated by the COVID-19 crisis.
The Congress had called the delay in paying GST compensation a “sovereign default” and going back on constitutional guarantees that were the reason states came on board with the GST regime. Several opposition-ruled states, including Bengal and Kerala, have been similarly upset.
(With Agency Inputs).

 

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