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Interview | GST Council, not Centre, must take call on compensation, says Tamil Nadu’s PTR

The five-year compensation period for states under the Goods and Services Tax regime ends on June 30. According to Tamil Nadu Finance Minister Palanivel Thiaga Rajan, if the GST Council is truly a federal body, it must decide whether states should be compensated for any revenue shortfall beyond this month.

June 30, 2022 / 09:42 AM IST

The matter of compensation to states under the Goods and Services Tax (GST) regime dominated headlines in the lead-up to the June 28-29 meeting of the GST Council. And according to Palanivel Thiaga Rajan, Tamil Nadu’s Minister for Finance and Human Resources Management, it is the Council that must vote and decide whether states’ demand for an extension should be granted.

“If this is truly a federal structure, if the GST Council is really the deciding authority, then on what basis can a decision be made outside the GST Council?” Thiaga Rajan said in a conversation following the conclusion of the 47th meeting of the Council here in Chandigarh.

While the GST Council took several decisions at the June 28-29 meeting, there is little clarity on the issue of whether states will continue to be compensated beyond June 30.

Per the law, states are guaranteed 14 percent growth in their GST revenues every year for the first five years of the indirect tax regime, with any shortfall to be made up from the compensation cess fund. With the five-year period ending today, states have been asking for an extension to the compensation period as they fear their revenues will slump going forward due to a variety of reasons, including the economic weakness caused by the coronavirus pandemic.