GST Council to take final decision on compensation payout to states: Sitharaman

Union Finance Minister (FM) Nirmala Sitharaman has cleared the air around the controversy related to the shortfall in GST (Goods and Services Tax) compensation, saying the Centre will try to reach a common ground with states, and the GST Council will take the final decision.

The FM, during her speech in the Lok Sabha, said all promises made by the government with regard to GST payout, including by former late finance minister Arun Jaitley, will be fulfilled by the government.

"Even if we are in an act of God situation, but we will discuss in the Council how to give compensation to the states... The Council will take a call on how to borrow to meet the (revenue) gap," she said.

She said the GST compensation will have to be paid from compensation cess kitty only. Notably, the states are staring at GST revenue shortfall of around Rs 2.35 lakh crore, of which Rs 97,000 crore is on account of GST compensation, while the rest due to the economic losses due to coronavirus, the government calculation suggests.

Both the states and the Centre are trying to reach a consensus over GST compensation payout, though the opposition ruled states have not accepted the government's proposals.

Also read: GST compensation: Chidambaram urges states to reject Centre's proposals

Last month, the Centre suggested two measures to meet the revenue shortfall: a special window worth Rs 97,000 crore by the RBI, which states can use to borrow funds, or borrowing of funds worth Rs 2.35 lakh crore from the market.

Besides, the government assured that it was ready to enhance the compensation cess deadline on luxury, demerit and sin goods beyond 2020.

Six non-BJP ruled states -- West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu -- later rejected the options given by the Centre to meet the GST shortfall.

Opposition parties and states said the Centre is backtracking from its constitutional commitment. On this, Sitharaman said in the lower house that these were "irresponsible" remarks.

"We are ready to discuss. We are taking everyone together and the Council will find a view. This is my optimistic expectation. The Centre is not reneging (from its commitment)," she assured.

The opposition also criticised the FM for her "act of god" remark, to which she said they would have accepted it had she said "force majeure". Without naming any country, she said even though many nations that earlier gave big fiscal stimulus amid coronavirus-induced lockdowns were now raising taxes, the Indian government was not planning any such move.

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