Chandigarh: A couple of dozen states on Wednesday pitched for extending by a couple of years the compensation paid to states for income misplaced from the implementation of the products and companies tax (GST) regime.

The GST Council, the best decision-making physique of the oblique tax regime, nevertheless, didn’t take any choice at its assembly right here.

A closing choice is more likely to be taken within the subsequent GST council assembly within the first week of August, Finance Minister Nirmala Sitharaman mentioned whereas speaking to the media after the forty seventh GST Council assembly right here.

“As many as 16 states spoke on GST compensation in right now’s assembly. Of this there have been 3-4 states that mentioned that they’ve to face on their very own and never rely on compensation,” Sitharaman mentioned.

When a nationwide GST subsumed 17 central and state levies from July 1, 2017, it was determined that states will likely be compensated for any lack of income from the brand new tax for 5 years. That timeframe is ending on June 30.

With two years being misplaced within the pandemic, states have sought an extension of this compensation interval by 5 years.

“A number of states right now mentioned that they want the compensation to proceed for a while, at the same time as few different states mentioned that sure it’s a query of popping out of pandemic however they’ve to face on their toes.

“There have been broadly statements being made with a way of whether or not compensation will be continued if not for 5 years, for a couple of years,” Sitharaman mentioned.

When the GST was rolled out, states have been promised compensation for income loss until June 2022. The compensation quantity was raised from levying a cess on luxurious, demerit and sin items over and above the 28 per cent tax.

Non-BJP dominated states, resembling Chhattisgarh, Kerala and Rajasthan, need the compensation regime to be prolonged by 5 years or the share of states within the GST revenues to be elevated to 70-80 per cent from the present 50 per cent.

Union Territory Puducherry, which is dominated by BJP, too needs that the compensation mechanism to be prolonged to make good the losses suffered as a result of GST rollout and anticipated some constructive final result within the subsequent council assembly in August.

As per information on income progress collated for the Council assembly, solely 5 out of 31 states/UTs – Arunachal Pradesh, Manipur, Mizoram, Nagaland, Sikkim – registered a income progress greater than the protected income charge for states beneath the GST within the monetary 12 months 2021-22. Puducherry, Punjab, Uttarakhand and Himachal Pradesh have recorded the best income hole between the protected income and post-settlement gross state GST income in 2021-22.

Although states’ protected income has been rising at 14 per cent compounded progress, the cess assortment didn’t enhance in the identical proportion, the COVID-19 pandemic additional elevated the hole between projected income and the precise income receipt, together with a discount in cess assortment.

To fulfill the useful resource hole of the states as a result of brief launch of compensation, the Centre borrowed Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to fulfill part of the shortfall in cess assortment.

The Centre, final week, notified extension of the compensation cess, levied on luxurious and demerit items, until March 2026 to repay borrowing that have been achieved in 2020-21 and 2021-22 to compensate states for GST income loss.


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