GST Council rules out hike in taxes amid COVID-19 as Centre places 2 options to states

In the 41st GST council meet, Finance Minister Nirmala Sitharaman, on Thursday, ruled out an increase in GST rates, saying 'this is not the appropriate time' as the country battles COVID-19 and its economic consequences. With several states complaining of non-payment of state dues by Centre, the Centre has placed two options for borrowing by states to meet the shortfall in GST revenues, pegged at Rs 2.35 lakh crore in the current fiscal. Sitharaman has stated that the economy is facing an extraordinary 'Act of God' situation, which may result in economic contraction. 

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Centre places before states 2 options for borrowing to meet GST revenue shortfall

Centre places 2 options before states

The Centre has calculated the compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Revenue Secretary Ajay Bhushan Pandey said of this, Rs 97,000 crore is on account of GST shortfall, while the rest is due to the impact of COVID-19 on the economy. Centre has reportedly refused to pay mandatory GST compensation of 14% for the current year due to COVID-19 pandemic.

• To alleviate state's GST stress, Revenue Secretary Ajay Bhushan Pandey said a special window can be provided to the states at a reasonable interest rate for the borrowing of Rs 97,000 crore - the amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
• The second option before the states is to borrow the entire Rs 2.35 lakh crore shortfall under the special window. "States have been given seven days' time to think over the proposal," Pandey said.

Seven non-NDA CMs vow to unitedly take on Centre over GST

7 state CMs band together over GST issues

On Wednesday, chief ministers of even non-NDA ruled states vowed to put up a united fight over the issue of non-payment of GST compensation to states by the Centre and to protect the federal structure. At a meeting called by Congress president Sonia Gandhi, the chief ministers of Maharashtra, Jharkhand, Punjab, Rajasthan, Chhattisgarh and Puducherry and West Bengal called for joint action on the GST issue and decided to collectively petition the prime minister at the earliest. All the chief ministers rallied behind Sonia Gandhi and accused the Centre of squeezing their funds in COVID times - with Thackeray saying, "We should decide whether we have to fight or fear". 

GST Council meeting debates revenue shortfall of states

"This refusal to compensate the states is nothing short of betrayal by the Modi government and a betrayal of trust of the people of India," said Gandhi while commenting on the Centre's refusal to pay state GST dues. While Mamata alleged that her government is yet to get Rs 53,000 crore from the union government, the Punjab CM agreed with Banerjee reiterating that Centre had not paid states' GST dues and it was necessary to meet the PM on this.