The meeting of the Goods and Services Tax (GST) Council is scheduled to be held on Monday, October 5. As of now, non-BJP ruled states still disagree with the Center on the issue of compensation. A total of 21 states, including BJP-ruled states, have supported the central government on the issue of GST compensation. These states had time till mid-September to opt for borrowing Rs 97,000 crore to make up for the reduction in GST revenue in the current financial year. However, states ruled by opposition parties such as West Bengal, Punjab and Kerala have not yet opted for the option given by the central government to raise debt.
Demand for alternative arrangement for GST compensation
Sources say that in the 42nd meeting of the GST Council to be held on October 5, states ruled by opposition parties may oppose the option of the Center. These states may demand alternative arrangements for GST compensation. These states believe that it is the constitutional obligation of the central government to compensate for the decrease in revenue of the states. It is noteworthy that in the current financial year, the revenue from the GST to the states may come down by Rs 2.35 lakh crore. According to the calculation of the Central Government, the implementation of GST is responsible for a reduction of just Rs 97 thousand crore, while the remaining Rs 1.38 lakh crore is due to Kovid-19.
In August, the central government gave two options to the states
The central government gave two options to the states in August. Under this, states can either avail a loan of Rs 97 thousand crore with the special facility provided by the Reserve Bank or can borrow Rs 2.35 lakh crore from the market. Non-BJP ruled states have come face to face with the central government over the reduction in GST revenue. Chief Ministers of six such states West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu have written letters opposing the option offered by the central government. These states want the central government to take a loan to compensate for the reduction in GST revenue, while the central government argues that it cannot raise debt in the hands of taxes which do not belong to its account.
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States have been facing difficulties in paying compensation since August 2019 when the reduction in cess reduction. The central government has subsequently had to use the cess amount deposited in 2017-18 and 2018-19 to pay compensation. The central government has released Rs 1.65 lakh crore as compensation for 2019-20, while the cess collection during this period has been just Rs 95,444 crore. Earlier, the amount of compensation in 2017-18 and 2018-19 has been Rs 41,146 crore and Rs 69,275 crore respectively.