41st GST Council meeting held by Hon’ble Finance Minister Nirmala Sitharaman.
The 41st GST Council Meeting was chaired by the Hon’ble Finance Minister Nirmala Sitharaman via video conferencing on 27th August, 2020. The meeting was attended by MOS Mr. Anurag Thakur, besides Finance Ministers of States & UTs and Senior officers from Union Government & States.
Here are key takeaways from the meeting:
- The GST collection this year has been severely impacted this year, in light of the COVID-19 pandemic, which has led to an economic slowdown. The GST Compensation Law, mandates that the states need to be given compensation.
- In the GST Council meeting held in March 2020, the Hon’ble FM sought the legal views of the Attorney General of India on the issue of compensation.
- The Attorney General has said that GST compensation has to be paid for transition period – from July 2017 to June 2022, however Revenue has to be protected. Hence, the compensation gap has to be met from cess fund, which in turn has to be funded from levy of cess. The Attorney General further added that the compensation gap cannot be met from the Consolidated Fund of India. hence, the compensation cess levy can be extended beyond 5 years, to meet the shortfall.
- The compensation gap arisen this year is expected to be ₹ 2.35 lakh crore due to COVID19 pandemic. The shortfall in compensation due to implementation of GST has been estimated to be ₹ 97,000 crore.
- In view of the above, two options were presented to the States and UT’s;
- Option 1: To provide a special window to states, in consultation with the RBI, in order to provide the ₹ 97,000 crore as a loan at a reasonable rate of interest, this amount can then be repaid after 5 years from collection of cess.
- Option 2: The entire GST compensation gap of ₹ 2,35,000 crore of this year can be met by the states, in consultation with the RBI.
- The states have requested for a detailed plan of both the options and a 7 working day window to think over and get back to the Hon’ble Finance Minister. Another GST Council meetingis likely to be held, after the states have provided their feedback.
- It must also be noted that these options would be available only during current financial year. The situation will be reviewed next year in the first week of April 2021 and a decision will be made on what is best for the country.
Vox Analytica GST
Would you like to subscribe to GST Updates by Riverus? Stay clued in on the latest notifications, circulars, other legislation information and case laws as soon as they are available.