Finance Minister Nirmala Sitharaman attended the 42nd meeting of the GST Council on Monday evening (Archive)
New Delhi:
The GST compensation due to state governments for this year, about Rs 20 billion, will be released tonight, Finance Minister Nirmala Sitharaman said on Monday after a marathon meeting of the 42nd Council of GST failed to provide a consensus on the mode of reimbursement of the full compensation, around Rs. 97,000 crore (increasing to Rs 2.35 lakh crore, including Covid-related relief).
The council has deferred any decision on this matter until its next meeting on October 12.
However, he extended the tax for another five years. The surcharge on luxury products including tobacco and cars, which is part of the GST, expired in 2022.
GST compensation has emerged as a sore point with state and union territory governments this year, particularly with the adverse economic impact of the pandemic and the Covid shutdown.
The center is struggling to pay compensation to states, due to a state’s revenue growing slower than 14 percent, because states have not gained much this year due to the months of lockdown required by the COVID crisis -19.
Congress had called the delay in paying GST compensation a “sovereign default” and backtracking on the constitutional guarantees that were the reason the states joined the GST regime. Several opposition-ruled states, including Bengal and Kerala, have been equally upset.
Following a GST Council meeting earlier this year, state and UT governments were asked to borrow either the total amount of Rs 2.35 lakh crore (which included Covid relief) or Rs 97,000 crore ( which was just a GST offset).
Tonight’s meeting was the first since the center presented its loan proposal.
So far, 21 states have agreed to borrow, and 10 opposition-ruled states refuse to do so.
These states, which include Kerala and Bengal, have written to Prime Minister Narendra Modi, reminding him of the “constitutional” responsibilities of his government in this confrontation.
States that oppose borrowing as a method of payment have also noted that this places an additional burden on their finances at an already difficult time. The center, they said, could shoulder this burden and repay the loan by shifting GST tax collection beyond 2022.
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