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GST Council to discuss compensation for states for third time tomorrow; decision on setting up group of ministers likely

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GST Council to debate compensation for states for third time tomorrow; determination on establishing group of ministers probably

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In its earlier assembly final week, the Council had determined to increase the surcharge on taxes on luxurious items past June 2022 however failed to succeed in a consensus on methods to compensate states for lack of tax income

New Delhi: The GST Council in its assembly on Monday is more likely to talk about the suggestion of non-BJP dominated states of establishing a ministerial panel to develop consensus on the problem of compensation, sources mentioned.

The Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising of state finance ministers, will for the third time in a row talk about the problem of funding the shortfall of Items and Providers Tax (GST) income of states.

Whereas some Opposition dominated states are demanding {that a} Group of Ministers be set as much as arrive at a choice on the mechanism for funding compensation shortfall, BJP dominated states, which have already opted for the borrowing choice given by the Centre, are of the view that they need to be given a go-ahead in order that they will get cash shortly.

The only agenda forty third assembly of the Council will talk about on the best way ahead, sources mentioned.

In its earlier assembly final week, the Council had determined to increase the surcharge on taxes on luxurious items akin to vehicles and tobacco merchandise past June 2022 however failed to succeed in a consensus on methods to compensate states for lack of tax income.

The projected complete compensation shortfall within the present fiscal stands at Rs 2.35 lakh crore.

The Centre in August gave two choices to the states to borrow both Rs 97,000 crore from a particular window facilitated by the RBI or Rs 2.35 lakh crore from the market and had additionally proposed extending the compensation cess levied on luxurious, demerit and sin items past 2022 to repay the borrowing.

Following a requirement by some states, the quantity of Rs 97,000 crore was elevated to Rs 1.10 lakh crore.

As many as 21 states – that are BJP dominated or have supported it on numerous points – have opted to borrow Rs 1.10 lakh crore to fulfill the compensation shortfall.

The Centre has launched Rs 20,000 crore to the states in direction of compensation shortfall thus far within the present fiscal.

Beneath the GST construction, taxes are levied below 5, 12, 18 and 28 per cent slabs.

On prime of the best tax slab, a cess is levied on luxurious, sin and demerit items, and the proceeds from the identical are used to compensate states for any income loss.

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