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| GST Council Fail To Reach Consensus |
The Council Will meet again on October 12 since GST Council fails to reach any consensus.
42nd meeting of federal tax body, the Goods and Services Tax(GST) Council, Took place via videoconference. The main focus of this discussion was to bridge the shortfall in states tax receipts.
The Goods and Services Tax(GST) Council on Monday failed to come to the conclusion. Overestimated ₹2.35 lakh crore shortfall in compensation cess collections this year.
The meeting was over seven hours and following which Nirmala Sitharaman asserted that she did not take “anybody for granted” as alleged by some State representatives in the Council during Monday’s discussions.
“We will not deny compensation dues to any State... borrowings have to be done and it has to be decided how much,” Ms. Sitharaman said, dismissing suggestions that States that don’t pick either of the two borrowing options offered by the Centre, could have to wait till next year to get any compensation.
As per the provision of the GST Compensation Cess Act, The entire cess collected during a year is required to be credited to a non-lapsable fund which is part of the Public Account.
It is meant to be used specifically to compensate states for the loss of revenue. Center promised to compensate 14% growth in the revenue of states.
Center has already released the full payout for the financial year 2020 of ₹1.65 lakh Crore. But Compensation payment for the financial year since April remains pending. This was the main issue for all the states due to COVID pandemic very state revenue is less.
This year Center estimated a shortfall of ₹3 lakh Crore out of which ₹0.65 lakh cess is collected and centre is the shortage of ₹2.35 lakh Crore.
Center had accounted ₹97,000 crore has GST Shortage of this year and remaining ₹1.38 lakh crore is due to the impact of COVID-19.
Two Plans Given By Center To States
The First Option was :
Center revised ₹97,000 Crore and made it to ₹ 1.10 Lakh Crore.
A special window can be provided to the states, in consultation with the reasonable interest rate for the borrowing of ₹ 1.10 lakh crore. In this both Principal and Interest, the amount can be repaid from cess collection even after 2022.
The 2nd Option was:
The option is to borrow the entire ₹2.35 lakh crore shortfall under the special window. In this state have to repay the interest amount from their coffers.
For two option the 21 states ruled by BJP government agreed on the first option. But opposition led states like West Bengal, Punjab and Kerala have not yet accepted the borrowing option given by the center.
In final Union Finance Minister Nirmala Sitharaman said the panel will meet again on October 12.
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