GST council meeting: States must demand compensation beyond June

States likely to demand compensation at next week’s GST council meeting

New Delhi:

The GST council at its meeting next week is likely to be a stormy affair with the opposition-governed states aggressively insisting on continuing compensation for loss of income, while the Center will defend such a move with reference to a narrow income position.

To cover the deficit in the GST Compensation Fund, the Center lent Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 and released to states as back-to-back loans to a part of the deficit in cess collection.

In addition, the Center has also released regular AVB compensation from the fund to cover the deficit.

“Last year, from the collection of compensation, the Center repaid Rs 7 500 crore for interest costs for the loan and Rs 14 000 crore must be paid this fiscal. From next fiscal the repayment of the principal amount will start, which will continue until March 2026, ”said an official.

The 47th meeting of the GST Council, chaired by the Union of Finance Ministers and consisting of State Finance Ministers, in Chandigarh, scheduled for 28-29 June, is likely to discuss the remuneration mechanism and revenue position of the center and states. let change.

According to estimates, some northeastern states do not require GST compensation.

After the 45th GST Council meeting in Lucknow, Union Finance Minister Nirmala Sitharaman said the regime of paying compensation to states for the income shortfall, which results from the subsumption of their taxes, such as VAT in the uniform national tax GST, will end in June next year.

However, the compensation money levied on luxury and defective goods will be collected until March 2026 to repay the loans made in 2020-21 and 2021-22 to compensate states for GST income loss.

Taxes on goods and services (GST) were introduced in the country with effect from 1 July 2017, and states are assured of compensation for the loss of any income arising from the implementation of GST for five years.

Although states’ protected revenues grew at 14 percent compound growth, revenue collection did not increase in the same proportion. The COVID-19 pandemic further widened the gap between projected revenue and actual revenue receipt, including a reduction in cash collection.

(Except for the headline, this story has not been edited by techlives staff and is being published from a syndicated stream.)

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