On Monday, the central government sought to buy peace by accepting the states’ demand for full compensation for their shortfall in tax revenue due to the implementation of the goods and services tax (GST) or the coronavirus pandemic, but a call final on how states will be compensated. it will be taken up by the GST Council next week.
The federal tax body, which met via video conference on Monday, decided to extend the GST tax on items such as cars, tobacco and soft drinks beyond 2022 for as long as it takes to pay off the debt incurred to offset tax losses. of the states.
Union Finance Minister Nirmala Sitharaman and GST Council President assured the states of full compensation and said the Center will disburse the states ₹20 billion rupees raised as compensation so far this year tonight.
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“No one will be denied compensation for losses arising from the implementation of GST or due to the impact of covid,” the minister said. The states’ GST revenue shortfall this year, either due to GST implementation or due to covid, will be fully covered, “he added, the minister assured.
The Sitharaman guarantee aims to pacify opposition-ruled states, including Kerala, Punjab and Delhi, which demanded the activation of a dispute resolution mechanism to resolve differences on the issue, although it could take time for the disputes to be settled political failures.
Kerala Finance Minister Thomas Isaac said in a tweet after the council meeting that 10 states had demanded that full compensation be paid this year under the provisions of the law and that the Center should borrow. “The decision was postponed until October 12,” Isaac said.
Sitharaman said that the loans states will make to cover the deficit will be outside their already improved borrowing limit of 5% of the state’s gross domestic product. “Neither the interest nor the principal should be paid with other resources of the states. Cess will take care of it … Full compensation will be paid. We may have differentiated between those related to covid and those related to GST. Both are paid, “said the minister.
Sitharaman also said that the group loan for GST-related losses that states may want to collect under the special RBI window has been raised from ₹97,000 crore to ₹1.1 trillion.
The council also decided to release ₹Rs 25 billion quotas for FY 2018 by the end of next week for states that received less tax revenue from Interstate Commerce (IGST) due to the adoption of an ad hoc disbursement formula.
As of January 1, companies with sales of up to ₹Rs 5 million will be allowed to file quarterly returns and pay taxes on a monthly basis.
The council also decided to exempt 18% of GST in satellite launch services aimed at boosting the national industry. The move is expected to benefit Isro and Antrix Corp.
The council also decided on the roadmap to revamp the return filing process with an emphasis on ease of doing business and better compliance.
“Continued efforts to simplify compliance, including those related to multi-digit auto population in January 2021 returns, are good for business. However, there should be a facility during the initial periods to deal with system errors, “said MS Mani, Senior Director, Deloitte India.
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