After the 40th GST Council meeting, Finance Minister Nirmala Sitharaman said that the council will meet again in July with single-point agenda to discuss the impact of the COVID-19 pandemic on tax revenues of the Centre and States and ways to bridge the revenue gap.
"If there is need for borrowings to meet compensation to states, who is going to borrow. How we are going to pay for it...," she said about next meeting of the Council, hinting that fall in revenues has become big cause of concern for the Centre to meet its liability towards the states as per GST legislation.
April was the month of complete lockdown, with only essential services permitted to operate. Consequently, the month will definitely see a dramatic drop in tax revenue. May is also likely to see a fall in the collection.
The Council will discuss ways to garner funds to compensate states for the revenue loss due to GST implementation. As per GST laws, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from 1 July 2017.
In the previous council meeting on 14 March 2020, Sitharaman had said that the Centre will look into the legality of GST Council borrowing from market to meet the compensation requirements.
On Friday, the Council decided to provide some relief to MSMEs (small and medium-sized entities) in the Goods and Services Tax (GST) framework in the form of reduced penalties and interest.
Finance Minister Nirmala Sitharaman, after the GST Council meeting announced waiver or reduced late fee and interest for delayed filings and payment of taxes by the dealers who have a turnover of less than Rs 5 crore.
The benefits are largely focused on smaller companies as India's economy is fueled by their growth. Many of these companies have been unable to comply with the regulations and interest/penalty would only add to their burdens.