GST Council meeting: Compensation cess of Rs 20,000 cr to be released to states today, says Nirmala Sitharaman

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The GST Council will meet again on October 12 to sort out the issues related to GST compensation

Union Finance Minister Nirmala Sitharaman said that the Centre would release compensation cess of Rs 20,000 crore to states towards the loss of revenue during 2020-21.

Speaking at the 42nd GST Council meeting on Monday through video conferencing, she further said that amount of about Rs 25,000 crore towards IGST of 2017-18 would also be released to the by next week.

“Centre is releasing compensation of Rs 20,000 crore to states on Monday towards loss of revenue during 2020-21 and an amount of about Rs 25,000 crore towards IGST of 2017-18 by next week,” she said.

The meeting was also attended by Union Minister of State for Finance Anurag Thakur besides Finance Ministers of the states and UTs and senior officers of the ministry of finance as well as the states and UTs.

Levy of compensation cess will be extended beyond the transition period of five years i.e., beyond June, 2022, for such period as may be required to meet the revenue gap. Further details will be worked out.

The GST Council will meet again on October 12 to sort out the issues related to GST compensation.

As a further step towards reducing the compliance burden particularly on the small taxpayers having aggregate annual turnover less than Rs 5 crore, the GST Council’s earlier recommendation of allowing filing of returns on a quarterly basis with monthly payments by such taxpayers to be implemented effective January 1 2021.  

Such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35 percent of the net cash tax liability of the last quarter using an auto generated challan.

There was no consensus regarding the solution to the issue of borrowing to make up for GST compensation shortfall. While 20 states opted for Option 1 to make up for the GST compensation shortfall, 10 Opposition states including Kerala, West Bengal, Puducherry, Punjab, Delhi, Chattisgarh again reiterated the need for the Centre to borrow funds.

“10 states demand that full compensation should be paid to the states during the current year as per clauses in the law and centre should borrow. Decision was postponed to the next meeting on 12th of October” Kerala Finance Minister Thomas Isaac tweeted.

Image credit: File photo

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