After 42nd GST Council meeting, the compensation to the states by the center remains unresolved

Business Finance Government

Ruling parties’ states and non-ruling parties’ states always have a dispute if it comes to deciding with both’s approval. This time this dispute is over GST compensation. On this 42nd Goods and Services Tax Council meeting on Monday, the compensation to the states by the center remains unresolved after being offered 2 options by the center to the states. Both the options that were given by the center were of borrowing and along with this an extension was given to the states regarding compensation cess on luxury and sin goods and this extension was for a beyond five-year transition period ending June 2022.

But after these options being given to the states, the non-ruling party states that are 10 in the whole country refused to take either option given by the center but in the same meeting, the extension over compensation cess on luxury and sin goods was approved. At the same time while refusing to both the options it is being said that the states asked the center to borrow funds instead of them. They asked this due to the Rs 2.35 lakh crore deficit that is occurring this year for compensation.

These 10 states that were Kerala, Jharkhand, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, West Bengal, and Chhattisgarh also asked for voting at the end of the meeting. This meeting was held for 8 hours. And in this meeting, option 1 that was borrowing of Rs 97,000 crore was changed to Rs 1.10 lakh crore due to a change in assumption in revenue growth of the country. Earlier it was expected that the revenue growth will be around 10% but now it is expected to grow at 7%.

Now, another voting is going to be held at the next meeting that will be on 12 October. As it is expected that voting will be in the favor of the ruling party because 20 states have already said that they are in the favor of option 1.

“To be fair to the Council, it did take a decision that cess will have to be extended beyond the five years…after that, there was this question of some states not wanting Option 1, and states wanting Option 3, which they have written to the Prime Minister about and which was forwarded to us for a reply. So the question was, it could be that 20 states have chosen Option 1, some of us have not chosen any…among those who have not chosen any, the argument was that it should be the Centre which borrows. On this there was a lot of discussions, it was felt that you cannot decide based on the 20 states who have written to you, we need to talk further. And I was also gently reminded that I can’t take anybody for granted. I don’t take anybody for granted… I have always been open for more and more talk,” Finance Minister Nirmala Sitharaman said.

“10 states request that full remuneration ought to be paid to the states during the current year according to provisions in the law and Center ought to acquire. The choice was delayed to the following gathering…,” Kerala’s Finance Minister Thomas Isaac posted on Twitter.

Bihar Deputy Chief Minister Sushil Kumar Modi disclosed to The Indian Express that there was agreement among more than 20 states for Option 1. “We wish to evade division, so one more week was given. On the off chance that they disagree, at that point casting a ballot can occur. Those states who have given their choices, they ought not to endure… It’s been a half year now, we need the cash. States ought not to capture the plan,” he said.

In the past gathering on August 27, the Center had proposed two alternatives to states: get Rs 97,000 crore (by GST usage) from an extraordinary window encouraged by the RBI or the total deficit of Rs 2.35 lakh crore (counting Rs 1.38 lakh crore because of COVID) from the market.

Sitharaman, in the interim, said cess assortment this year up until now, adding up to Rs 20,000 crore, would be dispensed to states Monday. The Council additionally chose to dispense Rs 24,000 crore to states by one week from now as the offer from Integrated GST (IGST) from the main year of usage.

GST remuneration has been forthcoming for this monetary year, adding up to Rs 1.5 lakh crore till July. Of this, the states with the greatest piece of forthcoming installments are Maharashtra (Rs 22,485 crore), Karnataka (Rs 13,763 crore), Uttar Pradesh (Rs 11,742 crore), Gujarat (Rs 11,563 crore), and Tamil Nadu (Rs 11,269 crore).

Among different choices, the Council reported unwinding inconsistency measures for littler citizens with a yearly turnover of not as much as Rs 5 crore who are needed to document GST returns just on a quarterly premise with month to month charge installments from January 1, 2021. They will, “for the initial two months of the quarter, have an alternative to paying 35 percent of the net money charge risk of the last quarter utilizing an auto-created challan,” a Finance Ministry proclamation said.

The Council affirmed the amended prerequisite of pronouncing the HSN (Harmonized System of Nomenclature) Code for merchandise in solicitations and deals return Form GSTR-1 with impact from April 1, 2021. Citizens with a turnover of over Rs 5 crore should cite the six-digit HSN, while those up to Rs 5 crore should cite up to four digits for B2B supplies of products and ventures.

The Council additionally chose to absolve homegrown dispatching of satellites, especially by new businesses, utilizing administrations by ISRO, Antrix Corporation Ltd, and NSIL, the announcement said.