New Delhi: The meeting of the GST Council to be held on Thursday is expected to be very rude. In this meeting, the central and state governments will face each other. The GST Council meeting on Thursday is being held with only one agenda, which is currently the biggest issue of confrontation between the central government and the state governments. In this meeting to be held tomorrow, the issue of compensation of the states will be the only subject of discussion.
Economic activity has been badly affected due to the lockdown due to Corona. Due to this, the GST collection of the central and state governments has been very low. The central government has not given compensation to the GST collection of states since April. Usually, this loss is replenished every 2 months by the central government to the state governments. In the last financial year i.e. 2019-20, the central government gave compensation of about 1.65 lakh crore rupees to the states.
Economic activities have been badly affected due to the lockdown in the country due to Corona. Due to this, the GST collection and the cess collection of the central government has decreased sharply. The compensation cess from which the central government compensates the state governments is 33 percent less than last year between April and July. The cess collection between April-July this year has been Rs 21940 crore.
Know what is the demand of the states?
State governments will try to pressure the central government to take loans from the market. Apart from this, the state governments will also give suggestions on bringing more products under its purview for the purpose of increasing compensation. At the same time, many state governments can also put pressure on the central government to increase the GST compensation cess from the present 5 years to 10 years.
What the law says
GST started in July 2017. At that time, under the GST Act, it was decided that for the next 5 years, the state governments will have to compensate for whatever revenue shortfall it has to face. A formula for calculating compensation was decided, under which 2015-16 would be considered as 14% revenue increase every year, considering the base year. The difference between the actual revenue of the state government and the projected revenue is called compensation, which the central government has to compensate.
Under the GST Act, the central government will have to give the entire compensation to the state governments from the compensation fund for 5 years. The central government collects money in this compensation fund by placing compensation cessation on selected items. However, due to the economic slowdown from August 2019, so much money is not being collected in the Compensation Fund, so that compensation can be given to the State Governments. At the same time, due to the lockdown from April 2020, the GST collection of the Central Government has decreased sharply and due to this, the Compensation Fund has reduced very much. In such a situation, there is expected to be a lot of ruckus between the states and the central government on the issue of compensation in the GST Council meeting to be held between the Central Government and the State Governments on Thursday.