The 41st GST Council meet headed by Finance Minister Nirmala Sitharaman was held today via video-conferencing in New Delhi to discuss on the compensation to states for revenue shortfall. As per the provisions of the Central Goods and Services Tax Act, states for any revenue loss in the first five years of GST implementation from July 1, 2017 were guaranteed compensation. For computing revenue loss or shortfall, 14% annual growth in GST collection by states over the base year of 2015-16 is taken into account.
In the media briefing post the meet, Ajay Bhushan Pandey, Finance Secretary said the meeting discussed on the compensation issue. And due to the pandemic there has been a severe hit on the GST collections in this year.
And as per the Attorney General the gap in compensation cannot be met out from the Consolidated Fund of India and the levy of compensation cess can be extended beyond a period of 5 years for addressing any revenue loss.
Further the FM lists out two options for compensating state for the shortfall in revenue during extraordinary covid 19 times.
Under option 1, the states shall be provided a special window, in consultation with the RBI, for providing Rs. 97000 crore at a reasonable interest rate, which could then be paid back after a span of 5 years from cess collection.
In the second option, the total GST compensation deficit of Rs. 2.35 lakh crore can be met by the states, in consultation with RBI.
And the States have sought 7 days time to consider on the two options.
Further, there has been taken no decision on GST rate revision on two-wheelers which the FM earlier signaled to be on the cards as she earlier cited that neither two-wheelers are a luxury thing nor they qualify as sin goods.
In the last GST meet on June 12, it was decided to waive off fees for late filing of GST returns between July 2017 and January 2020, in order to reduce the impact due to Covid 19 led crisis on MSMEs.