The GST Council at its assembly subsequent week is prone to be a stormy affair with the opposition-ruled states aggressively pushing for the continuation of compensation for income loss, whereas the Centre will defend such a transfer citing a good income place.
To meet the shortfall within the GST compensation fund, the Centre has borrowed and launched to states Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to fulfill part of the shortfall in cess assortment.
In addition, the Centre has additionally been releasing common GST compensation from the fund to fulfill the shortfall.
“Last year, out of the compensation cess collection, the Centre has repaid Rs 7,500 crore towards interest cost for the borrowing and Rs 14,000 crore is to be paid this fiscal. From next fiscal, the repayment of the principal amount will start, which will continue till March 2026,” an official stated.
The forty seventh assembly of the GST Council, chaired by the Union Finance Minister and comprising state Finance Ministers, in Chandigarh scheduled on June 28-29 is prone to see dialogue veer round compensation mechanism and income place of the Centre and states.
As per estimates, some northeastern states don’t require GST compensation.
After the forty fifth GST Council assembly in Lucknow, Union Finance Minister Nirmala Sitharaman had stated the regime of paying compensation to states for the income shortfall, ensuing from subsuming their taxes, akin to VAT within the uniform nationwide tax GST will finish in June subsequent yr.
However, the compensation cess levied on luxurious and demerit items, will proceed to be collected until March 2026 to repay the borrowings that have been completed in 2020-21 and 2021-22 to compensate states for GST income loss.
Goods and Services Tax (GST) was launched within the nation with impact on July 1, 2017, and states have been assured of compensation for the lack of any income arising on account of the implementation of GST for 5 years.
Though states’ protected income has been rising at 14 per cent compounded progress, the cess assortment didn’t enhance in the identical proportion. The COVID-19 pandemic additional elevated the hole between projected income and the precise income receipt, together with a discount in cess assortment.
(Except for the headline, this story has not been edited by NDTV employees and is printed from a syndicated feed.)