GST Council to discuss compensation cess today

NEW DELHI: As the GST compensation cess issue still remains unresolved with around 10 opposition-ruled states and Union Territories not agreeing with the Centre's borrowing proposals, the GST Council, consisting of all state Finance Ministers and headed by the Union Finance Minister, will meet on Monday to discuss and try to reach to a consensus on the matter.

The last meeting of the Council a week back did not result in any consensus among the states as although around 20 states opted for the first among the two options offered by the Union Government, 10 states and Union Territories stayed put on their stand that they would not borrow in lieu of the compensation cess. With the COVID-19 pandemic sharply reducing the revenue realisation of both the Centre and the states, the GST compensation needs of states have enlarged substantially beyond what is expected to be collected through compensation cess. This gap, however, needs to be filled and in this regard, the Centre offered the states two borrowing options to meet the shortfall in compensation cess collection this year.

The GST Council is yet to receive the unanimous support of the states for this proposal with about 10 opposition-ruled states and Union Territories wanting the options to be dropped and the Centre undertaking all borrowings to pay for the GST compensation shortfall to states.

According to people in the know, the Finance Ministry has ruled out voting on the borrowing options given by the Centre to the states in lieu of their GST compensation dues at Monday's GST Council meeting.

Sources in the government said that as per constitutional provisions, the GST Council does not have the jurisdiction to approve the borrowing plan of states and it has to be decided only between the states and the Expenditure Department of the Finance Ministry. The Expenditure Department is already working and discussing with the states individually to get the borrowing programme going so that the compensation issue is settled.

Sources said that even if all the states do not agree to the borrowing options for settling GST compensation, the plan may be rolled so that the states do not suffer with regard to their enhanced expenditure needs this year in the wake of the pandemic. (IANS)

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