GST Council Meeting Live: Deadlock Over GST Compensation Continues Between Centre And States  

The GST Council failed to reach a consensus on the issue contentious issue of pending GST Compensation for the states at its 42nd meeting today.

The decision has now been deferred to Oct. 12 when the council will meet again.

However, the Centre will disburse the amount collected as compensation cess this year, approximately Rs 20,000 crore, to states by tonight, Finance Minister Nirmala Sitharaman said in a media briefing.

The deadlock over the mode of the pending GST compensation transfers between the Centre and certain states continue. The Centre had given the states two options, of which 21 states have agreed to the one that allowed them to borrow and cover the shortfall in compensation arising due the implementation of GST. This amount works out to be around Rs 1.1 lakh crore, according to Sitharaman.

However, ten states have demanded that it is the Centre which should borrow funds and pay states their complete dues. These states have also written to Prime Minister Narendra Modi of this option.

Sitharaman said that no state will be denied their dues even if a consensus is not reached on Oct. 12. She also said that the compensation cess will be extended beyond 2022.

Watch the full press briefing here.

• India Said To Raise Borrowing For States Under Special Window To Meet GST Shortfall
• More Than Half Of India’s State Governments Choose Rs 97,000-Crore Borrowing Option To Meet GST Shortfall
• GST Compensation Financing May Debut A New Type Of Government Borrowing — Exclusive
• States To Get Covid-Related GST Shortfall If They Borrow From Special Window, Official Says

Finance Minister Nirmala Sitharaman will brief the media on decisions taken at today’s Goods and Services Tax Council meeting soon. The meeting assumes significance with many non-Bharatiya Janata Party ruled states still in disagreement with the central government on the compensation issue.

While as many as 21 states, mostly ruled by the BJP or parties which have supported it on issues, had till mid-September opted to borrow Rs 97,000 crore to meet the GST revenue shortfall in the current fiscal, opposition-led states like West Bengal, Punjab and Kerala have not yet accepted the borrowing option given by the centre.

The meeting is headed by Finance Minister Nirmala Sitharaman.

Sources told PTI that in the 42nd meeting of the Council on Oct. 5, opposition-ruled states would object to the centre's borrowing options and demand alternative mechanism for funding GST compensation deficit.

The centre in August gave two options to the states to borrow either Rs 97,000 crore from a special window facilitated by the Reserve Bank of India or Rs 2.35 lakh crore from market, and has proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.

Chief Ministers of six non-BJP ruled states — West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu — have written to the centre opposing the options which require states to borrow to meet shortfall.

Ten states have demanded that they be paid their full GST compensation by the Centre during the current year, according to Kerala Finance Minister Thomas Isaac.

The Centre will disburse Rs 20,000 crore—the amount collected as compensation cess this year—among the states, Sitharaman said.

The Government of India will disburse Rs 24,000 crore Integrated GST—which is divided equally between the Centre and states—to those states that recieved less due to anomalies, the finance minister said.

Such states will receive the amount by the end of next week.

Sitharaman said that this was a long-pending issue waiting to be resolved. Difficulty arose on how to get the money back from states that had received more IGST than others.

The finance minister said they did not intend to take the states' money back, but it is something that will be done gradually.

From Jan. 1, taxpayers will less than Rs 5 crore annual turnover will not be required to file monthly GSTR-1 and GSTR-3B returns. Instead, they will now do it on a quarterly basis.

However, since States need money monthly, a taxpayer can pay 35% of the tax paid in the previous quarter in first two months of a quarter and pay the entire tax due in the third month, Revenue Secretary Ajay Bhushan Pandey said.

These taxpayers will be required to be file only eight returns annually.

The GST Council has deferred a decision on the mode of payment of pending GST compensation share of the states to Oct. 12.

Finance Minister Nirmala Sitharaman said that about 20-21 states chose the first option given by the Centre that involved states borrowing to cover the compensation shortfall.

Other states that did not choose any option wanted the Centre to borrow and pay the shortfall instead, Sitharaman said.