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Business Economy

GST compensation gap during current year expected to be around Rs 2.35 lakh cr

GST compensation gap during current year expected to be around Rs 2.35 lakh cr

New Delhi, Aug 27 (UNI) GST Compensation gap during the current financial year is expected to be around Rs 2.35 lakh crore due to Coronavirus pandemic and different options are being considered for payment of compensation amount to the states.
Addressing reporters after the 41st GST council meeting, Finance Minister Nirmala Sitharaman said collection has been severely impacted this year, due to Covid-19.
Ms Sitharaman said, 'Two options were placed before states, we told them that we will facilitate talking with the Reserve Bank of India and help getting G-security linked interest rates so that each state does not have to struggle for loans.'
She said the shortfall in compensation due to implementation of GST has been estimated to be Rs 97,000 crore.
Option one presented to GST Council is to provide a special window to states, in consultation with the RBI, to provide the Rs 97,000 crore at a reasonable rate of interest, this money can then be repaid after five years from collection of cess.
Option two presented to GST Council was that the entire GST compensation gap of Rs 2,35,000 crore of this year can be met by the states, in consultation with the RBI.
She said states have requested the Centre to lay down both options in detail, and give them seven full working days to deliberate on it and get back, a brief GST Council meeting may be held again.

As per GST Compensation Law, states need to be given compensation, Finance Secretary Ajay Bhushan Pandey said.
As mentioned by the Finance Minister in the GST Council meeting held in March 2020, the legal views on the matter were sought from Attorney General K K Venugopal, Mr Pandey said the AG said that GST Compensation has to be paid for transition period - from July 2017 to June 2022.
Compensation gap has to be met from cess fund, which in turn has to be funded from levy of cess, the Finance Secretary said.
The Attorney General's clear opinion was that the compensation gap cannot be met from the Consolidated Fund of India.
The AG suggested that the compensation cess levy can be extended beyond 5 years, to meet the shortfall, the Finance Secretary said.
For full six hours during the meeting, not a minute of discussion was on GST rate increase, Ms Sitharaman said.

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