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States unlikely to allow restructuring of GST rates for next 6-7 months

Finance Secretary Ajay Bhushan Pandey earlier this week informed the Parliamentary Standing Committee on Finance that the government is in no position to pay the GST share of states in keeping with the current revenue sharing formula

July 30, 2020 / 07:35 PM IST

States are unlikely to immediately agree to a rejig of the Goods and Services Tax (GST) slabs given the present economic situation caused by the novel coronavirus pandemic, a senior state government official told Moneycontrol.

"GST is a consumption tax. When the whole consumption cycle is down, rejigging of tax slabs is counter-intuitive. In previous GST Council meetings, both Centre and states have agreed on this. Slab restructuring can't happen till the the effects of the slowdown wear off, not before six-to-seven months at least," the official said.

Some states have put forward the alternative to borrow from the market to settle the issue of compensation, but that has legal issues. GST Council, according to the official, is a constitutional body and its purpose is purely recommendatory in nature.

"The GST Council doesn't have borrowing powers. The attorney general has said that the council can think of borrowing from the market. But will such a borrowing have a sovereign guarantee? How does it raise money, who would guarantee it? All these legalities need to be worked out," the official said.