Will the Center knock on the door of the Reserve Bank to reimburse GST?

New Delhi, Thursday 27 August 2020

The 41st meeting of the GST Council was held today in which a number of important discussions took place. The meeting was chaired by Finance Minister Nirmala Sitharaman herself.

Corona has led to a sharp decline in the earnings of the Center and the states. The Center says that the state should get money from the market, while the states say that the Center should do the work.

GST collection is expected to decline by Rs 2.35 lakh crore in the current financial year (2020-21). In fact, the requirement is Rs 3 lakh crore.

But the revenue from cess is likely to be Rs 65,000 crore, so the amount is Rs 2.35 crore, of which only Rs 9,700 crore is due to GST implementation, and the reason for the decline is epidemic.

States are given 2 options to reimburse the payment amount. Whether the Center itself compensates the states or borrows from the RBI, the state will give its opinion within 7 days.

The first of the two options offered for repayment is that the states get a special loan of Rs 97,000 crore from the Reserve Bank at a very low interest rate.

Another option is for the entire Rs 2.35 lakh crore to be borne by the states with the help of the Reserve Bank. The states have asked for seven days.

Once there is an agreement between the Center and the state on any option, it will work in that direction quickly. "This option is only for the current financial year," he said. The fifth year in April 2021 will be discussed again.

Significantly, Rs 1.5 lakh crore was to be deposited in the GST compensation room between April and July during the Corona. But the truth is that the government's earnings in April and May were nominal.

At the meeting, the Attorney General said that in 2017, when the GST was implemented across the country, a transition period of five years was announced. This time is until June 2022. The Center said that the states which will be affected by GST will be reimbursed.

This information was given by Finance Secretary Ajay Bhushan Pandey. At the GST Council meeting in March, Finance Minister Nirmala Sitaram sought legal advice on the payment of compensation.

At a press conference, the finance secretary said that the Koro epidemic has led to a sharp decline in GST collection. Compensation for GST needs to be given to the states, as per the law.

He said that in the financial year 2019-20, the Center gave Rs 1.65 lakh crore to the states in the form of GST compensation. It also includes Rs 13,806 crore given in March. Cess collection in the financial year 2019-20 was 95444 crore.