new Delhi The Goods and Services Tax (GST) Council meeting is likely to be held in the second half of April, which according to state finance ministers is expected to be a stormy one, with an emphasis on extension of GST compensation beyond June.
However, the Center is reluctant to provide additional assistance to the states for fear of worsening their financial position.
Several people aware of the development said that the states may press for increasing the GST compensation by two to five years in the upcoming meeting, arguing that they may suffer substantial losses if proper compensation is not given, the Center said. may oppose any such move. ,
The GST Council, in its September meeting in Lucknow, had decided to extend the period of compensation cess till March 2026, but the collection would be used “purely to repay back-to-back loans taken by the Center between 2020-21 and 2021”. was to be done. -22″ and not to give further compensation to the states, Finance Minister Nirmala Sitharaman had said then.
States are given full compensation for the first five years of GST implementation at an estimated revenue growth rate of 14% from the base year of 2015-16. Compensation cess is levied on luxury and sin items such as aerated drinks, coal, pan masala, cigarettes and automobiles over and above the peak rate of 28%. “As far as the Center is concerned, the situation remains the same. There is no scope for increasing the compensation for the states after June. The cess collection will be used to repay back-to-back loans over the extended period till March 2026. So, where is the compensation (to the states from 2002 onwards) paid? The issue is that there is no cess available till March 2026.
Another central government official said the focus of the GST Council would be on increasing revenue after June, and not relying on compensation. “Measures to increase revenue like reforms in reverse duty, removal of certain exemptions can be traced. The Group of Ministers is considering an exercise to rationalize the rates.
A presentation was made to the GST Council on options to increase revenue after June. GST Compensation Cess collection for 2021-22 has been revised to 1.05 trillion 1 trillion estimated in last year’s budget. GST Compensation Cess is expected to mop-up 1.2 trillion for 2022-23.
West Bengal’s Minister of State for Finance Chandrima Bhattacharya told Mint that the state will press for an extension of at least two years. “I have already personally raised it with the Centre. We have said that without this the work of the state would not be possible.”
Kerala also sought extension of the compensation period by a few years at an estimated revenue growth rate of 14%. Kerala Finance Minister KN Balagopal told Mint that the state is looking for extension of GST compensation by more than five years. “We will take it up in the next GST meeting,” he said.
This comes at a time when the Russia-Ukraine war and a sharp rise in oil prices are affecting India’s plan to merge GST slab rates and simplify the indirect tax system with just three broad rates, according to Mint. had told earlier.
Delhi Deputy Chief Minister and Finance Minister Manish Sisodia said, “All the states have surrendered their tax rights to facilitate the implementation of GST. If there was no GST on the initiative of the central government, then the states would have the right to take care of their economy on need basis. When you get the rights surrendered, you have to ensure that the state does not starve,” Sisodia said.
Queries sent to a spokesperson of the Union Finance Ministry on Tuesday remained unanswered till press time.
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