GST Council to meet again on Oct 12 over compensation plan


New Delhi: The decision taken to meet again in October was suggested by Bihar Deputy Chief Minister and Finance Minister Sushil Modi, after the Council’s Monday meet failed to break the deadlock between the Centre and the state governments on the issue of compensation.

Addressing a press conference after the meet, Sitharaman said that only because 20 states accepted Option 1, does not mean that it can be thrust upon others. “We need to talk further.”

In a sober tone, she said: “I was gently reminded that I can not take anybody for granted… Although I don’t take anybody for granted.”

Earlier at the 41st meeting of the GST Council, the Centre had proposed two options to state governments to cover the compensation gap and meet their expenditure requirements amidst the Covid-19 disruption.

The first option given by the Centre is to provide a special borrowing window to states, in consultation with the Reserve Bank of India, to provide Rs 97,000 crore at a “reasonable” interest rate.

The debt, along with accrued interest, can then be repaid to the states after five years from collection of cess.

At Monday’s meeting, the Council also recommended extension of GST cess beyond the transition period of five years i.e. beyond June 2022 for such period as may be required to meet the revenue gap.

The Centre had also proposed to give a further relaxation of 0.5 per cent in states’ borrowing limit under the FRBM Act as the second leg of the first option. This will allow states to borrow more unconditionally to cover their earning shortfall on accounts of GST and Covid-19.

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