GST Council grants states 7 days to study options available to claim GST compensation

NEW DELHI: States have asked the GST Council for seven working days to examine the options available to them regarding the GST compensation. The GST Council said it will send a detailed note to states on the two options available to them in the next two days.
According to government data, this year’s shortfall in GST collection will be Rs 3 lakh crore. Further examination of available data shows that the GST Council will be able to garner Rs 65,000 crore as compensation cess this year.
This will lead to a gap of Rs 2.35 lakh crore, which the Finance Ministry has occurred due to Covid-19.
States discussed options available to them for five hours during the GST Council meet on Thursday. In addition, the states sought detailed notes on the options available to them from the GST Council.
Union Finance Minister Nirmala Sitharaman said, “GST Council will look at the issue again in April next year.”
These are the two options available with the states:
Option 1- States can choose to borrow more, beyond the expected compensation itself, because of the economic hit caused by Covid-19. If a state goes for Option 1, it will borrow less but its compensation entitlement will be protected. Therefore, borrowing less and getting cess later.
Option 2- States can borrow more and pay for it using cess collected during the transition period.
“Centre will act as a facilitator between states and the RBI and make sure all the states get to borrow at the same rate without any discrimination,” Nirmala Sitharaman said. She further added that GST Act did not foresee an ‘Act of God’ (Covid-19 pandemic) and that the GST Act hard-wired compensation of 14 per cent but things did not go as per plan because of Covid-19.



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