Union Finance Minister Nirmala Sitharaman on Thursday said that the coronavirus pandemic has hit the economy bad as the goods and services (GST) collection has the shortfall of Rs 2.35 lakh crore for fiscal 2021.
The minister told that the centre has released over Rs 1.65 lakh crore as GST compensation to states for fiscal 2020, including Rs 13,806 crore for March.
“Compensation gap which has arisen this year (expected to be Rs 2.35 lakh crore). This shortfall is due to Covid-19 as well. Shortfall in compensation due to implementation of GST has been estimated to be Rs 97,000 crore,” the FinMin said.
She further said, “Two options were placed before states, we told them that we will facilitate talking with RBI and help getting G-security linked interest rates so that each state does not have to struggle for loans.”
Finance Minister’s remarks comes during a GST Council meeting which is currently underway.
“States have requested us to lay down both options in detail, and give them 7 full working days to deliberate on it and get back, a brief GST Council meeting may be held again,” she said.
“Annual GST compensation requirement is estimated to be around Rs 3 lakh crore, and cess collection is expected to be around Rs 65,000 crore, leaving us with an annual compensation gap of Rs 2.35 lakh crore,” Revenue secretary Ajay Bhushan Pandey said.
“During April – July 2020, total GST compensation to be paid is Rs 1.5 lakh crore, this is so because there was hardly any GST collection in April and May,” he added.
Finance Minister further said, “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 and decide action for 5th year.”
“There may be some states which may prefer to get hard-wired compensation rather than going to market to borrow more. Option was tailor-made considering that states can take a call depending on compensation they expect to come,” Finance Minister said.
“Government will give a further relaxation of 0.5% in states’ borrowing limit under FRBM Act as 2nd leg of Option 1. States can choose to borrow more, beyond expected compensation itself, since that is the injury caused by Covid-19,” she added.
She also said at the meeting that Two-wheelers may merit to go to the GST council for consideration.
As per the GST law, states have been guaranteed payment for loss of revenue for five years since the Act has been enforced.
States have been promised compensation for any revenue shortfall till 2022 if they fell below 14 per cent annual growth.