Next GST Council meeting which would be its 41st Meeting, is scheduled to be held on 27th August 2020. The meeting is to held with a single agenda which is how to pay the compensation to the states. The collection during this time of corona pandemic has taken a huge dip and paying the compensation to states has been a big headache for the government.
It was assured to the states vide GST laws at the time of inception of GST regime that there would be a 14% increase in states revenue for five years from 2017 to 2022. The shortfall in the revenue was to be compensated through the levy of compensation cess on luxury and sin products. The prospects of GST collections in this financial year look quite meek and draws no inspiration. States have been demanding timely payment of compensation from the Centre citing that it is responsibility of the central government. Centre have been claiming that it is the Council to decide and reality is the cess collection is quite low to pay the compensation. The scheduled GST Council meeting is to resolve this dispute between states and central government.
The total compensation paid to the states for FY 2019-20 amounted to Rs. 1,65,302/- crores while the cess collected during the year was of Rs. 95,444/- crores. This gap is obviously going to widen during the current financial year.
Therefore, the option of market borrowing to pay the compensations to states is to explored. Though it would not be easy as guarantee issue crops up since collections revival is not a surety as of now. The Council is also likely going to explore the revenue revival.
Finance Minister after the 40th GST Council Meeting had hinted that the next GST Council meeting would be held only to resolve and discuss the compensation pay out to states. This meeting which was to held in July was postponed due to some technical issues and is now scheduled for August 27.
After the meeting on 27th August, GST Council is again going to meet on 19th September for 42nd GST Council meeting to discuss other GST issue such as rate revision on items effected from inverted duty structure.
CA Kalpak Kaplash
