Finance Minister Nirmala Sitharaman chaired the 41st Goods and Service Tax(GST) meet on Wednesday to discuss on compensating states for revenue shortfall amid the coronavirus pandemic.
The government said the coronavirus pandemic has affected goods and services tax(GST) collection with a shortfall of Rs 2.35 lakh crore for fiscal 2021.
The Finance Minister, after a discussion with decision making body responsible for fixing GST policies, said the covid-19 pandemic was unprecedented. It was “an act of God” that affected the GST collections. she said. “…This year we are facing an extraordinary situation. We are facing an act of God where we may even see a contraction,” she said.
The centre has released over ₹ 1.65 lakh crore as GST compensation to states for fiscal 2020, including ₹ 13,806 crore for March, while cess collected for GST compensation was only ₹ 95,444 crore, the FM said.
Under the Central Goods and Services Tax Act, states have been guaranteed payment for any loss of revenue in the first five years since the GST was implemented on July 1, 2017. The shortfall is calculated assuming an annuals growth of 14 percent in GST. However, this year due to the coronavirus pandemic, the centre is unable to pay GST dues to states.
The states have, meanwhile, said the Centre is “morally bound” to compensate and the “refusal is nothing short of a betrayal”.
The government has now placed two options to pay off before the states including help from the Reserve Bank of India.
Revenue Secretary Ajay Bhushan Pandey said said a special window can be provided to the states, in consultation with the RBI, at a reasonable interest rate for borrowing of Rs 97,000 crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
The second option before the states is to borrow the entire Rs 2.35 lakh crore shortfall under the special window.
“Two options were placed before the states. We can facilitate through RBI. States have asked to put us both the options in a detailed form today and give them seven working days, after that they will come back. It means we can have a small meeting on GST. We will take a call. Two bi-monthly payments are delayed this year. We want only for this year. The GST Council can look into the payments again in April next year,” Ms Sitharaman said.
Meanwhile, Congress has accused Centre of “sovereign default”, stating it has forced decision on the states. They also mentioned that asking states to borrow the required money defeated the foundation on GST was built which had promised to come to rescue of the states in the situation of crisis.
Punjab Finance Minister Badal Singh has said the solution that was arrived at is not satisfying. Government of India owes ₹ 4,400 crore to Punjab for which the total salary bill is ₹ 1,800 crore and the state has demanded to pay off the amount as the coronavirus pandemic has thrashed the economic situation in the state.
