GST collection severely hit by Covid: FM

August 27, 2020 17:12

The 41st meeting of GST Council chaired by Finance Minister Nirmala Sitharaman is being held. Highlights from the meeting.

Ajay Bhushan Pandey, Finance Secretary, says, "Collection has been severely impacted this year, due to the Covid-19 pandemic. As per GST Compensation Law, states need to be given compensation.

"Central govt released more than Rs 1.65 lakh crore as GST compensation to states for FY 2019-20, including Rs 13,806 crore for March. Total amount of compensation released for 2019-20 is Rs 1.65 lakh crore, whereas cess amount collected was Rs 95,444 crore."

The Finance Secretary said that the Attorney-General said that GST Compensation has to be paid for a transition period -- from July 2017 to June 2022. Revenue has to be protected and compensation gap to be met from cess fund, which in turn has to be funded from levy of cess.

As mentioned by Finance Minister in GST Council meeting held in March, legal views of the matter were sought from the Attorney General of India who said that GST compensation has to be paid for transition period from July 2017 to June 2022: Compensation gap which has arisen this year (expected to be Rs 2.35 lakh crores), is due to Covid-19 as well.

The shortfall in compensation due to the implementation of GST has been estimated to be Rs 97,000 crores.

Finance Minister Nirmala Sithaaraman said that states have asked the Centre to give them 7 working days to think about the options. These options would be available only during the current year, the situation would be reviewed next year.

"We may have another GST meet soon. AG's clear opinion was that compensation gap cannot be met from India's consolidated fund.

Option 1 presented to GST Council was to provide a special window to states, in consultation with RBI to provide Rs 97,000 crores at a reasonable interest rate.

Option 2 presented to GST Council was that the entire GST compensation gap of Rs 2,35,000 crore of this year can be met by states, in consultation with RBI. These options will be sent to states for a view within 7 Days & will apply for this fiscal year only.

Once the arrangement is agreed upon by GST Council, we can proceed fast and clear these dues and also take care of the rest of the financial year. These options will be available only for this year; in April 2021, the Council will review &decide action for 5th year.

During April-July 2020, total GST compensation to be paid is Rs 1.5 lakh crores, this is so because there was hardly any GST Collection in April and May.

Annual GST compensation requirement is estimated to be around Rs 3 lakh crores, and cess collection is expected to be around Rs 65,000 crores, leaving us with an annual compensation gap of Rs 2.35 lakh crores.

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