NEW DELHI : The goods and services tax (GST) council meeting likely to be held in the second half of April is expected to be a stormy one, with several states set to push for an extension of GST compensation beyond June, according to state finance ministers.
However, the Centre remains reluctant to commit additional support to states for fear of upsetting its financial position.
Several people aware of the development said while states may press for an extension of GST compensation by two to five years at the forthcoming meeting, arguing that they may have to face substantial losses if not suitably compensated, the Centre is likely to oppose any such move.
The GST Council had, in the September meeting in Lucknow, decided to extend the compensation cess period till March 2026, but the collection was to be used “purely to repay back-to-back loans taken by the Centre between 2020-21 and 2021-22″ and not to further compensate states, finance minister Nirmala Sitharaman had said then.
The states are given full compensation for the first five years of the introduction of GST on the assumed revenue growth rate of 14% from the base year of 2015-16. Compensation cess is levied on luxury and sin items such as aerated drinks, coal, pan masala, cigarettes and automobiles over the peak rate of 28%. “The position remains the same as far as the Centre is concerned. There is no scope to extend compensation for states beyond June. The cess collection in the period extended till March 2026 will be utilized to repay the back-to-back loans. So, where does the compensation (to states beyond 2022) get paid from? The point is there is no cess available till March 2026,” said a senior government official. Also, the Constitution’s 101st amendment states that compensation has to be paid for five years until June 2022, he added.
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