gst council meeting: GST Council meet ends without conclusion on compensation

Finance minister Nirmala Sitharaman announced on Monday that the Centre and states ended the GST (Goods and Services Tax) Council meeting without conclusion. This comes after a long-drawn feud between state governments and the Centre that remain at loggerheads regarding GST compensation.

Sitharaman called it a “very useful meeting”, adding that this was a continuation of the 42nd council meeting. All states spoke and there was intense engagement, according to the FM. She reiterated that the Council clarified on certain specific subjects and that the collection of cess was inadequate to pay the compensation.

“The Centre can not borrow, states will have to borrow” Sitharaman explained.

The Council met for the third time in a row to discuss the issue, with minister of state for finance Anurag Thakur, finance ministers of states and UTs and senior officers from Union governments and states also present in the meeting.

Earlier in the day, FM Sitharaman announced a host of new measures to boost consumer spending in the economy.

What transpired in the 42nd GST meet (October 5)

  • After a marathon meeting, the Centre announced that it will disburse the amount collected as compensation cess this year, approximately Rs 20,000 crore, to states.
  • Easing of Compliance norms: From Jan. 1, taxpayers will less than Rs 5 crore annual turnover will not be required to file monthly GSTR-1 and GSTR-3B returns. Instead, they will now do it on a quarterly basis.

Two-option formula

  • The Centre had given the states two options, of which 21 states have agreed to the one that allowed them to borrow and cover the shortfall in compensation arising due the implementation of GST.
  • The government gave two options to the states to borrow either Rs 97,000 crore from a special window facilitated by the RBI or Rs 2.35 lakh crore from the market and had also proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing. The amount of Rs 97,000 crore was increased to Rs 1.10 lakh crore.

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