Finance Minister Nirmala Sitharaman addressed the 41st GST Council meeting today through video conferencing. Talking to the media after the meeting, Finance Secretary Ajay Bhushan Pandey said that the GST collection has been badly affected this year due to the Covid-19 epidemic. According to the GST Compensation Act, states need to be compensated.
However, the Attorney General said that the reduction in GST collection cannot be met by the Integrated Fund of India. Pandey said that GST compensation has to be paid for the transition period from July 2017 to June 2022.
Pandey said that so far in the fiscal year 2020-21, there has been a decrease of Rs 2.35 lakh crore in GST collection. Of this, only 97 thousand crore rupees were due to the implementation of GST. The remaining loss is due to the epidemic.
Finance Minister Nirmala Sitharaman said that during the five-hour meeting of the GST Council, two options to compensate the states were discussed. Sitharaman said that the states had asked him for 7 days to think about alternatives. He said that options would be available only during the current year, the situation would be reviewed next year. Sitharaman said that we can have another GST meeting soon.
The Revenue Secretary of the Ministry of Finance said that the total GST compensation during April-July 2020 stood at Rs 1.5 lakh crore, as GST collections were not collected in April and May.
The Secretary said, “Once the arrangement has been agreed by the GST Council, we can quickly settle the outstanding amount and also take care of the financial year ahead.” He said that these options would be available only for this year. In April 2021 the Council will review and decide the action for the 5th year.
The revenue secretary of the finance ministry said that the annual GST compensation requirement is estimated to be around Rs 3 lakh crore, and the cess collection is expected to be around Rs 65,000 crore.
The meeting was earlier scheduled to be held in July itself. This was also announced by Finance Minister Nirmala Sitharaman after the GST meeting in June in the Corona era. There has been a drastic reduction in GST collections due to the nationwide lockdown of the Corona epidemic and the impact of economic activity across the country.
It is noteworthy that on Wednesday, the issue of GST compensation was raised in a meeting chaired by Sonia Gandhi of the chief ministers of seven non-BJP ruled states. Chief Ministers of the opposition said that the Center has not paid GST compensation to the states for the last four months. He said that this situation has become very frightening today. Sonia Gandhi, taking the Narendra Modi government in the dock, said that the refusal to compensate the states on GST is nothing but deception by the Modi government to the people of the states.
It is to be noted that under the GST Act, there is a provision to compensate states for any tax loss by the central government for five years after the implementation of GST. Non-BJP governments are upset over the Central Government not giving full GST compensation to the states and they are constantly raising this issue.