Centre Govt in Search of Market Borrowing for States GST Compensation

Our country was already facing an economic slowdown and the Covid-19 pandemic makes the situation worsen. Due to the continuous shortfall of Good and Service Tax (GST) caused by various reasons, the central government is now is questing ways to compensate states. The States were guaranteed to be paid for any loss of revenue in the first five years after the introduction of GST Check out the latest official updates under GST (Goods and Services Tax) by the CBIC department. Also, we include notifications & circulars/orders regularly. Read more as per the GST Law Goods and Services Tax (Compensation to States) Act, 2017. Additionally, the shortfall is calculated by assuming 14% annual growth over the base of FY 2015-16.

The GST law states that “The GST Law Goods and Services Tax (Compensation to States) Act, 2017 permitted to levy Compensation cess for providing compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force (01/07/2017), for a period of five years or for such period as may be prescribed on the recommendations of the GST Council”.

The Compensation cess is levied on luxury, sin items, and on some goods imported into India. It is applied as per the provisions of section 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, 1975. As per reports in the FY 2019-20, the amount of GST revenue collection was low, and the central government cleared all the compensation till November 2019 without any discrimination, but for Dec. 2019 to March 2020, GST compensation payment is due.

It needs to be mentioned here that the Centre government has released ₹ 15,340 crore GST compensation to states/ Union territories in the ongoing financial year, even without proper revenue mop-up from GST due to the lockdowns. Due to the same, a sharp fall has been also reported in cess collection in the compensation fund.

The Government already received suggestions for the payout of the consolidation by using the Consolidated Fund of India or by borrowings from the market and some other. As per sources, the central government is thinking about ways such as borrowing from the market and extending the cess repayment period. Meanwhile, the GST council meeting Get to know about GST (Goods and Services Tax) council 1st to 39th meeting updates and decisions taken by members. We have covered 1st meeting to last meeting decisions to be held in the next month in which the GST Council is expected to discuss some options such as increasing the GST rates or rationalization of tax slabs. So, the picture is expected to be clear after this meeting.