After 5-hr meet on GST compensation, states get 7 days to choose from 2 options
Finance minister Nirmala Sitharaman on Thursday chaired the 41st meeting of the GST Council that focused on the agenda of compensating states for revenue shortfall and has given the states two options to choose from.
After the five-hour long meeting, revenue secretary Ajay Bhushan Pandey said the GST collection was severely impacted due to the coronavirus pandemic and shortfall in FY21 stood at Rs 2.35 lakh crore of which Rs 97,000 crore was due to implementation of GST while the rest due to virus outbreak.
Giving the breakup of the shortfall sum, Centre said the compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Hence, the total shortfall is estimated at Rs 2.35 lakh crore.
Finance minister Nirmala Sitharaman said the council discussed two options of compensating states for the current fiscal and has decided to give seven days to choose from the two. She said the GST Council will look at issue again in April next year.
Explaining the first option, Pandey said a special window can be provided to the states, in consultation with the (Reserve Bank of India) RBI, at a reasonable interest rate for borrowing of Rs 97,000 crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
The second option before the states is to borrow the entire Rs 2.35 lakh crore shortfall under the special window.
Sitharaman said the economy is facing an extraordinary ‘Act of God’ situation, which may result in economic contraction.
(With agency inputs)