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Last Updated : Dec 03, 2019 08:53 PM IST | Source: Moneycontrol.com

GST Council to meet on December 18; compensation cess issue to top agenda

There is a view that compensation cess may no longer be enough to adequately compensate states and there is a need to come up with some other mechanisms.

The GST Council, at its next meeting on December 18, is expected to deliberate on an alternative mechanism for compensation cess and look at ways to boost revenue from indirect taxes.

There is a view that compensation cess may no longer be enough to adequately compensate states and there is a need to come up with some other mechanisms.

The government has written to state GST officers, asking for suggestions from state governments on ways to increase GST revenues.

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This comes at the backdrop of compensation to states increasing 'significantly' and is unlikely to be met through compensation cess collections, a senior government official told Moneycontrol.

Compensation cess is levied on luxury and sin goods, and the proceeds are used to compensate states for any loss they incur within the first five years of GST implementation.

Some states have said that they aren't receiving the compensation cess from the central government, which they said was impacting their finances.

Last month, West Bengal Finance Minister Amit Mitra pointed out that the dues owed to the states and three Union Territories with Legislative Assemblies stood at Rs 40,000 crore.

According to the GST Act, States and UTs with Assemblies are guaranteed compensation if the GST revenue growth is less than 14 per cent. The amount is paid bi-monthly.

This year, States and three UTs were paid Rs 28,000 crore for the June-July period. They are yet to be paid for August-September, which was due in October.

"The upcoming GST Council meeting will take up the issue of compensation cess raised by states and ways to augment revenue," the official said.

The Council will also review items that are currently exempt from GST. The Council will also look at the inverted duty structure — that taxes inputs at a higher rates than outputs.

"The Council has also sought suggestion on rate calibrations for addressing inverted duty structure," the official said.

The government had constituted a panel of officers to suggest ways to increase GST revenues after the collections had fallen to a 19-month low of Rs 91,916 crore in August.

In September, the collections picked up to Rs 95,380 crore in September, and crossed Rs 1 lakh crore in October. The panel is yet to submit its report to the government.

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First Published on Dec 3, 2019 08:51 pm
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