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States to seek compensation beyond June

States expected to push for compensation at next week’s GST Board meeting

New Delhi:

The GST Council when it meets next week is likely to be a heated affair with opposition-led states aggressively pushing for continued compensation for lost revenue, while the Center will defend such a move by citing a tight income position.

To fill the gap in the GST compensation fund, the Center has borrowed and released to the States Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 in the form of back-to-back loans to fill part the deficit in collection of disposals.

Additionally, the Center has also released regular GST compensation from the fund to cover the shortfall.

“Last year on the collection of claims, the Center repaid Rs 7,500 crore for the interest cost of the loan and Rs 14,000 crore is to be paid in this financial year. fiscal year, repayment of the principal amount will begin, which will continue until March 2026,” an official said.

The 47th meeting of the TSG Council, chaired by the Union Finance Minister and comprising the State Finance Ministers, in Chandigarh, scheduled for June 28-29, is expected to see the discussion veer around the compensation mechanism and the revenue position of the Center and the States.

It is estimated that some northeastern states do not require GST offset.

After the 45th meeting of the GST Board in Lucknow, Union Finance Minister Nirmala Sitharaman said that the compensation scheme for states for loss of revenue resulting from the subsumption of their taxes, such as VAT, in the national uniform tax GST would end in June next year.

However, the compensation tax levied on luxuries and demerits will continue to be collected until March 2026 to repay borrowings that were made in 2020-21 and 2021-22 to compensate states for lost revenue. of the GST.

The Goods and Services Tax (GST) was introduced in the country with effect from July 1, 2017, and states were assured of being compensated for the loss of revenue arising from the implementation of the GST for five years .

Although protected state revenues increased by 14% compound growth, cess collection did not increase in the same proportion. The COVID-19 pandemic has further widened the gap between projected revenue and actual revenue, including a reduction in tax collection.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)


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