The Finance Ministry said that it would borrow Rs 1.1 lakh crore and give that amount as loan to states under a special borrowing window, rather than states do it on their own. A legal battle with states is something the political leadership wanted to avoid with regards to the GST Council, sources told Moneycontrol.
Finance Minister Nirmala Sitharaman while addressing the press after the GST Council meeting insisted that there were differences within the GST Council on the borrowing issue, but they cannot be termed as a dispute
By allowing 20 states to borrow more to meet GST compensation shortfall, the Centre seems to have encroached on the turf of the apex decision-making body
The vexed issue of GST compensation cess has put the government in a bind. Opposing states contend that the government is constitutionally bound to compensate them and are not willing to accept the options provided by the Centre.
The Centre has not ruled out further stimulus and no decision has been taken as to whether the finance ministry will challenge the Vodafone tax verdict or not, says the top official
The Centre's insistence to not term the borrowing issue as a dispute is primarily based on concerns that states might then use it to push for a dispute resolution mechanism
Small taxpayers having aggregate annual turnover of less than Rs 5 crore will be able to file returns on a quarterly basis with monthly payments from January 1, 2021
The gap in compensation arising due to the extraordinary situation due to COVID-19 will be paid out of the cess which gets collected after 5 years.
States, which have been opposing the Centre's formula for the filling the compensation gap, may opt for Rs 1.1 lakh crore borrowing option
National auditor’s findings could set the tone for the crucial Council meeting on Monday
The last date for filing annual return for 2018-19 fiscal for Goods and Services Tax (GST) registered taxpayer is September 30.
The matter on whose obligation it was to pay states, in case of a resource crunch in the future, was settled in the 7th, 8th and 10th GST Council meetings under the chairmanship of then finance minister Arun Jaitley and finance secretary Hasmukh Adhia, says Manish Sisodia
The Centre has given two options to the states to borrow either from a special window facilitated by the RBI or from market and has also proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022.
The Centre on August 27 had placed before the GST Council two options for borrowing by states to meet the shortfall in Goods and Services Tax (GST) revenues, pegged at Rs 2.35 lakh crore in the current fiscal.
The Fiscal Responsibility and Budget Management committee had suggested bringing down the general government debt-to-GDP ratio to 60 percent by 2023. The calculation included 40 percent for the central debt and 20 percent for states' debt.
States have united and come out strongly and rejected the Centre's options placed before the GST Council at the 41st meeting.
The economic slowdown has led to a Rs 70,000 crore shortfall last fiscal. In FY21, the same is estimated to widen to Rs 2.35 lakh crore
According to the GST law, the Centre is expected to pay compensation to states for the states' loss of revenues because of subsuming of taxes.
Mitra has urged the Centre to honour the constitutional promise to pay compensation for 5 years, adding that it should “not renege on the commitment to compensate the states."
The GST Council will try to reach a consensus on the issue of borrowing from the market to solve the compensation problem
The options before the GST Council to meet shortfall in compensation to states could be rationalise GST rates, cover more items under the compensation cess, increase the compensation cess, or recommend higher borrowing by states
Sources said that the 41st meeting of the Goods and Services Tax (GST) Council would be a single agenda meeting on states' compensation to be held via video conferencing.
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
The GST Council in its meeting last month waived late fee for delayed filing of GST returns by registered entities with nil liability between July 2017 to January 2020.
Moneycontrol's Shraddha Sharma does a 3-Point Analysis to understand the key issues discussed by the GST Council and its recommendations.