GST Council Meeting: Finance Minister Says Separate Session Soon To Discuss Compensation Period
Finance Minister Nirmala Sitharaman chairs the 43rd GST Council meeting, held virtually. (Image: Finance Ministry)

GST Council Meeting: Finance Minister Says Separate Session Soon To Discuss Compensation Period

Finance Minister Nirmala Sitharaman has assured states of a separate meeting of the GST Council to discuss the issue of extending the period of compensation under the goods and services tax regime.

In a media briefing after the 43rd GST Council meeting, held today, the minister said, “I’ve assured the members there will be a special session only to discuss that one agenda...”.

This will be held soon, she said, to discuss all matters regarding compensation and compensation cess.

As we are in the last of the five years of 14% compensation protected revenue arrangement, I have assured the members, we’ll hold a special session of GST Council, exclusively on single-point agenda of how compensation cess be collected, how long, how much, beyond July 2022.
Nirmala Sitharaman, Finance Minister

Ahead of Friday’s meeting, several states, governed by parties other than the ruling Bharatiya Janata Party, stated the finance minister, who chairs the GST Council, should take up their demand for a longer period of compensation - which currently ends in June 2022.

Among them were Punjab and Chhattisgarh.

“The finance minister has agreed to discuss the entire compensation period issue in another meeting. The finance minister has promised us another Council meeting will take place within this quarter with the only agenda to start discussing on the issue of extending compensation period, since states are grappling with high deficits,” Manpreet Singh Badal, finance minister of Punjab told BloombergQuint. “This meeting will only discuss how to augment resources and work out the issue of compensation period with it ending on June 2022,” Badal said.

The chair has ruled that a special session of the GST Council will be called to discuss the issue of extending the compensation period as well as the cess shortfall in FY22, T.S. Singh Deo, finance minister of Chhattisgarh, told BloombergQuint.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, met on Friday after a delay of nearly seven months.

Also read: GST Council Meeting: Some States To Push For Extension Of GST Compensation Period 

Compensation Backstory

The GST Constitutional amendment assured states of compensation for loss of revenue for five years (2017-2022), as state levies were subsumed under the common national tax. A subsequent law mandated a 14% compounded growth in states’ GST revenue every year till 2022. A cess was imposed on sin goods to fund this revenue assurance.

The finance ministers of West Bengal, Jharkhand, Punjab, Kerala, Rajasthan, Tamil Nadu and Chhattisgarh in a meeting on Wednesday had deliberated on the issue and decided to bring it up for discussion.

An extension in the compensation period for states would require a constitutional amendment.

Also read: GST Council Meeting: Centre Proposes To Borrow Rs 1.58 Lakh Crore To Fund Cess Gap 

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