New Delhi:
The GST council at its meeting next week is likely to be a stormy affair with opposition-ruled states aggressively pushing for continued revenue loss compensation, while the Center will defend such a move citing a tight revenue position.
To make up for the shortfall in the GST compensation fund, the Center has lent and released to states Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to part of the deficit in ces collection.
In addition, the Center also released the regular GST compensation from the fund to cover the shortfall.
“Last year, the Compensation Collection Center repaid Rs 7,500 crore for the loan interest charges and Rs 14,000 crore is due this fiscal year. March 2026,” said an official.
The 47th meeting of the GST Council, chaired by the Union Minister of Finance and composed of the State Finance Ministers, in Chandigarh, scheduled for June 28-29, is likely to lead to a discussion around the compensation mechanism and the income position of the center and the states.
It is estimated that some northeastern states do not require GST compensation.
After the 45th GST council meeting in Lucknow, the Union’s finance minister, Nirmala Sitharaman, had said that the regime of paying compensation to states for the income shortfall resulting from including their taxes, such as VAT in the unified national tax GST, will end in June next year.
However, the offset tax levied on luxury and value goods will be collected through March 2026 to repay the loans made in 2020-21 and 2021-22 to compensate states for GST revenue losses.
Effective July 1, 2017, the Goods and Services Tax (GST) has been introduced in the country and states are guaranteed compensation for the loss of any revenue resulting from the implementation of GST for five years.
While states’ protected revenues have grown at a compounding rate of 14 percent, cession collections have not increased at the same rate. The COVID-19 pandemic has further widened the gap between projected revenues and actual revenues, including a reduction in tax collection.
(Except for the headline, this story has not been edited by DailyExpertNews staff and has been published from a syndicated feed.)