Centre to give Rs 20,000 crore for GST compensation to states, next round of meeting on October 12


The crucial meeting of the Goods and Services Tax Council (GST Council) was held today under the chairmanship of Finance Minister Nirmala Sitharaman. The meeting was organised through video conferencing where the Centre and the state governments brainstormed on the issue of GST compensation.

However, there was no consensus among the states on several issues in the meeting. The council’s next meeting will be held on October 12 for further discussion on the reduction in collections and compensation to states.

Talking to the media after the day-long meeting, the Finance Minister said that many important decisions were taken in today’s meeting. She said that a compensation cess of Rs 20,000 crore has been collected so far this year and will be distributed to the states today. She also informed that the GST Council has decided to continue with the compensation cess even after June 2022.

A disbursement of Rs 24,000 crore to compensate IGST will also be completed by next week. Sitharaman told that a committee has been formed under the leadership of Bihar Finance Minister Sushil Modi to compensate IGST. This committee will study the impact faced by the states regarding revenue collection and compensate them under a formula.

The finance minister made it clear that no state will be denied compensation of the loses incurred by the states due to the COVID-19 pandemic. About 20 states are already in agreement with the decision of the minister while some need time. 

“So the question was 20-21 states deciding to opt for the options one (the RBI window) and others wanting the Centre to borrow. Lot of discussions happened on that… Bihar deputy chief minister Sushil Modi suggested that three to five days be given to the states to discuss the issue. I gave eight days and the next meeting will happen on October 12,” Finance minister Nirmala Sitharaman said.

It is to be noted that the Centre has given the states the option to borrow from the market or from the Reserve Bank to compensate for the decrease in GST collection.

According to the estimates of the Centre, the states are likely to witness a deficit of Rs 2.35 crore in the collection of Goods and Services Tax (GST) in the current financial year. The shortfall of about Rs 97,000 crore is due to GST implementation, while the loss of the remaining Rs 1.38 lakh crore is due to COVID-19. 

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