Fri. Jun 18th, 2021

TWO DAYS ahead of the GST Council meeting, seven non-BJP states Wednesday met virtually to build a consensus on extending the compensation regime for five years beyond 2022 besides pressing for pending compensation for the current financial year.

In the virtual meeting hosted by Rajasthan Urban Development and Housing Minister Shanti Dhariwal, finance ministers Amit Mitra (West Bengal), T S Singh Deo (Chhattisgarh), Palanivel Thiagarajan (Tamil Nadu), K N Balagopal (Kerala), Manpreet Singh Badal (Punjab) and Rameshwar Oraon (Jharkhand) also discussed the need to grant zero rating to Covid-related relief products.

The GST compensation shortfall for 2021-22 is estimated to be Rs 2.69 lakh crore. Of this, the Central government estimates to collect Rs 1.11 lakh crore from the cess leviable on sin and luxury goods. The balance Rs 1.58 lakh crore will need to be borrowed to meet the promised compensation to states under the GST regime, according to the agenda note shared ahead of Friday’s GST council meeting.

For 2020-21, the government has released Rs 1.10 lakh crore in the form of back-to-back loans to states for meeting the compensation shortfall. As per Centre’s estimates, Rs 63,000 crore is pending to states after back-to-back loans and IGST settlement.

Singh Deo told The Indian Express they deliberated upon all points on the agenda. “We discussed the state of the economy and tax collections, and there was a commonality of opinion on all items. It is not just about the guaranteed 14 per cent compensation support, but some states have gone below even last year’s GSDP levels. Pending compensation payments of over Rs 60,000 crore to states for previous fiscal and relief on Covid-related products were also discussed. We’ll take up these issues in the meeting,” he said.

The states reached a consensus “that the Union government should respect cooperative federalism”. The objective behind the meeting was to reach a common ground on issues that are likely to come up on May 28. Given the revenue losses due to Covid-19 this year, all states want the Centre to release the outstanding GST at the earliest.

In the meeting, the states also agreed that the additional borrowing limit should be increased to 5 per cent of GSDP.

Balagopal of Kerala said the meeting discussed the prevailing fiscal position of the states. “We aired the concern over the outstanding GST compensation and prevailing economic crisis… On Thursday, the state would finalise its stand to be adopted in the next GST council meeting,’’ he said.

The agenda note for the GST Council meeting estimated that while the GST revenues may see a recovery in 2021-22, there will still be a gap between the compensation requirement and the cess available. The Budget has assumed 17 per cent growth in GST revenues, translating into monthly gross GST revenue of Rs 1.1 lakh crore.

Based on this assumption, it has been estimated that for the period February 2021 to January 2022, the gap between protected revenue and the actual revenue after release of compensation would be around Rs 1.6 lakh crore.

Another scenario has been presented wherein if the monthly GST revenue is estimated to be Rs 1.15 lakh crore, the actual gap would be Rs 1.25 lakh crore. —(With inputs from Shaju Philip in kochi)

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