New Delhi: Amid the major concern of dropping Goods and Services Tax (GST) revenue to states, the GST Council met today and came out with two options to compensate the states.
Finance Minister Nirmala Sitaraman said that the entire GST compensation gap of Rs. 2,35,000 crore of this year can be met by the states, in consultation with RBI.
Sitharaman, who chaired the 41st GST council meet, said, once the arrangement is agreed upon by GST Council, dues will be cleared fast and also take care of the rest of the financial year.
Two options before states to bridge revenue shortfall
The first option provides a special window to states in consultation with the Reserve Bank of India (RBI) to provide Rs 97,000 crore at a reasonable rate of interest. This money can then be repaid after five years from the collection of cess. The second option is that the entire GST compensation gap of Rs 2.35 lakh of this year can be met by states in consultation with the RBI.
“Two options were placed before states. We told them that we will facilitate talking with RBI and help getting G-security linked interest rates so that each state does not have to struggle for loans,” said Finance Minister Nirmala Sitharaman after the GST meet.
“Once the arrangement is agreed upon by GST Council, we can proceed fast and clear these dues and also take care of the rest of financial year,” said Sitharaman.
These options will be available only for this year. In April 2021, the Council will review and decide action for the fifth year.
Finance Secretary Ajay Bhushan Panday said the total GST compensation to be paid during April to July is Rs 1.5 lakh crore as there was hardly any GST collection due to COVID-19 nationwide lockdown.
The annual GST compensation requirement is estimated to be about Rs 3 lakh crore and cess collection is expected to be around Rs 65,000 crore, leaving the Centre with an annual compensation gap of Rs 2.35 lakh crore.
