GST: States have been asking the center to pay their taxes on goods and services
New Delhi:
Twenty-one states have given their borrowing option proposed by the goods and services tax council to cover the deficit in the center’s compensation amid the coronavirus pandemic, sources said. These 21 states opted for “option 1”, which allows them to borrow the tax collection shortfall due to the change to the GST, estimated at Rs 97,000 crore, issuing debt under a special window coordinated by the Ministry of Finance.
Puducherry is the only place governed by Congress that has made a decision on choosing an option, the sources said, adding that no other Congress or opposition-governed states have announced their decision.
“Option 2” allows states to borrow the entire compensation deficit of Rs 2.35 crore, including the deficit due to the coronavirus crisis, by issuing market debt.
If these remaining states do not give their options before another scheduled GST Council meeting on October 5, they will have to wait until June 2022 to receive their dues, but on the condition that the GST Council extend the collection period for taxes beyond 2022. The GST Council is the highest decision-making body for the national tax introduced in July 2017.
“It should be noted that the 41st meeting of the GST Council took place in the context of the opinion of the Attorney General of India on the issue of termination of compensation, in which he has opined that the center has no obligation to compensate for the loss income, “said a person with direct knowledge of the matter, who asked not to be identified.
“It is the GST Council and not the central government that has to find ways, according to the Attorney General, to cover the compensation deficit. Furthermore, a state can borrow, even with the strength of future income from the compensation fund. “he added. the person said.
Congress had called the delay in payment of GST compensation a “sovereign default” and backtracking on the constitutional guarantees that had been the reason states had joined the GST plan.
The center is hard-pressed to pay GST fees to states that haven’t earned much this year due to the months of shutdown required by the COVID-19 crisis. Punjab, for example, has said it may experience a revenue shortfall of 25 billion rupees this year.
GST collections, including payment of compensation to states, had not reached targets even before the coronavirus pandemic, making it difficult for the center to compensate states.
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