GST Council Meeting 27 August: State revenues started dwindling since August 2019.
Finance Minister Nirmala Sitharaman will chair the 41st Goods and Services Tax (GST) Council meeting at 11 am this morning through video conferencing. The meeting will discuss compensation to states and attempt to evolve a consensus on borrowing from the market to compensate states for their revenue shortfall.
The Minister of State for Finance and Corporate Affairs Anurag Thakur, finance ministers of states and union territories and senior officials from the Union and state governments will attend the meeting, the Ministry of Finance had announced on Wednesday.
The Council will discuss how to pay compensation to states at a time when the compensation cess collection has plunged in wake of coronavirus. It is likely to discuss options such as borrowing from the market, rationalising GST rates, increasing the compensation cess or higher borrowing by states to be repaid by the future collections.
The government has to compensate states fully for the loss of revenue in Goods and Services Tax (GST) during the coronavirus crisis, its top lawyer has advised the government ahead of the meet. The Finance Ministry had reportedly sought advice from the Attorney General KK Venugopal on the matter as it faces strident demands from states for compensation under GST.
The Central Goods and Services Tax Act had guaranteed that states would be compensated for losses of revenue, if any, in the first five years of GST implementation. According to the provisions of the Act, states would be eligible for compensation for any revenue shortfall starting from July 1, 2017 until 2022. The shortfall is calculated assuming a 14 percent annual growth in GST collections by states over the base year of 2015-16.
However, payment of GST compensation to states became an issue after revenues started dwindling since August 2019. And matters worsened this year as the economy came to a standstill due to Covid-19 pandemic.
