Finance Minister Nirmala Sitharaman informed the Lok Sabha on Monday that a few states, including Telangana, have requested a five-year extension for the compensation paid to them for the revenue shortfall due to the implementation of the GST.
Pursuant to section 18 of the Constitution (Hundred and First Amendment) Act 2016, Parliament shall by law, on the recommendation of the Goods and Services Tax (GST) Board, provide for compensation to States for loss of account revenue resulting from the implementation of the Goods and Services Tax for a period of five years.
When a national GST encompassed 17 central and state levies from July 1, 2017, it was decided that states would be compensated for any lost revenue from the new tax for five years. This deadline ended on June 30 of this year.
The GST Board, at its 42nd meeting, recommended extending the period for levying the GST Indemnity Tax beyond June 2022 to cover the entire deficit as well as service the back-to-back loan granted states to fill their resource gap due to the short reparation, she said in a written response to Lok Sabha.
The Center has borrowed Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to make up some of the shortfall in collecting cessions, she said .
In addition, she said, the Government of India has further released Rs 86,912 crore to the States/UT on May 31, 2022 and cleared the entire provisionally eligible GST compensation due till May 2022.
The move was made to help states manage their resources and ensure that their programs, especially capital expenditures, are carried out during the fiscal year, she said.
This decision was taken despite the fact that only about Rs 25,000 crore was available in the GST compensation fund, she said, adding that the balance of Rs 62,000 crore was released by the Center from its own resources pending collection of the tax.
As a result of continued GST reforms undertaken by the Center and the States, on the recommendations of the GST Board, the Finance Minister said, buoyancy in GST revenue has been achieved in recent months.
The average gross monthly collection of GST for the first quarter of FY23 was Rs 1.51 lakh crore against the average monthly collection of Rs 1.10 lakh crore in the first quarter of the previous FY, showing an increase of 37%.
In response to another question, the finance minister said that global factors such as the Russian-Ukrainian conflict, soaring crude oil prices and tighter global financial conditions are the main reasons for the weakening of the rupee. India against the US dollar.
Currencies such as the British Pound, Japanese Yen and Euro have weakened more than the Indian Rupee against the US Dollar and as a result, the Indian Rupee has strengthened against these currencies in 2022, a- she declared.
The outflow of foreign capital from the portfolio is one of the main reasons for the depreciation of the Indian rupee, she said, adding that monetary tightening in advanced economies, particularly in the United States of America, has tendency to induce foreign investors to withdraw their funds from emerging markets.
Foreign portfolio investors have withdrawn about $14 billion from Indian equity markets so far in 2022-23, she said.
Regarding the impact of a falling currency, she said, the nominal exchange rate is only one factor that impacts an economy.
The depreciation of a currency is likely to improve the competitiveness of exports, which has a positive impact on the economy, while the depreciation also has an impact on imports by making them more expensive.
The Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of excessive volatility. It has raised interest rates in recent months, which has increased the attractiveness of holding Indian rupees for residents and non-residents alike.
Earlier this month, the RBI raised overseas borrowing limits for companies and liberalized standards for foreign investment in government bonds by announcing a series of measures to boost foreign exchange inflows.
The RBI raised the ECB limit under the automatic route from $750 million or its equivalent per fiscal year to $1.5 billion, and eased the standards for foreign portfolio investment in the market. debt.