Centre to release Rs 20,000 cr GST compensation to states
Council to meet again on Oct 12 after failing to reach a consensus on compensation
NEW DELHI: GST compensation due to State governments for this year - around Rs 20,000 crore will be released on Monday night, Finance Minister Nirmala Sitharaman said after a marathon meeting of the 42nd GST Council.
The crucial meeting, however, failed to reach a consensus on ways to compensate states as the panel was split on political lines over using borrowing as a tool. A decision on this matter has been deferred till the next meeting on October 12. Briefing reporters after a marathon meeting of the panel, Finance Minister Nirmala Sitharaman said 21 states had opted for one of the two options the Centre had previously suggested for borrowing to meet the shortfall in GST collections. She said the panel decided to extend using GST cess collections to compensate states beyond previously agreed June 2022 timeframe.
The panel besides easing compliance burden of small taxpayers also exempted satellite launch services by ISRO and Antrix, Finance Secretary Ajay Bhushan Pandey said. GST compensation has emerged as a sore point with State and union territory governments this year, particularly with the adverse economic impact of the COVID pandemic and lockdown.
The Centre is finding it difficult to pay states’ compensation as they have not earned much this year due to months of lockdown necessitated by the COVID-19 crisis.
The Congress had called the delay in paying compensation a sovereign default and going back on constitutional guarantees. Several opposition-ruled states, including Bengal and Kerala, have been similarly upset.
After a meeting of the GST Council earlier this year, State and UT governments were asked to borrow - either the full amount of Rs 2.35 lakh crore, which included COVID relief. Monday’s meeting was the first since the centre put forward its borrowing proposal.