Ahead of the GST Council meeting, seven non-BJP states Wednesday met virtually to build a consensus on extending the compensation regime for five years beyond 2022 besides pressing for pending compensation for the current financial year.
In the virtual meeting hosted by Rajasthan Urban Development and Housing Minister Shanti Dhariwal, finance ministers Amit Mitra (West Bengal), T S Singh Deo (Chhattisgarh), Palanivel Thiagarajan (Tamil Nadu), K N Balagopal (Kerala), Manpreet Singh Badal (Punjab) and Rameshwar Oraon (Jharkhand) also discussed the need to grant zero rating to Covid-related relief products.
The GST compensation shortfall for 2021-22 is estimated to be Rs 2.69 lakh crore. Of this, the Central government estimates to collect Rs 1.11 lakh crore from the cess leviable on sin and luxury goods.
The balance Rs 1.58 lakh crore will need to be borrowed to meet the promised compensation to states under the GST regime, according to the agenda note shared ahead of Friday’s GST council meeting.
For 2020-21, the government has released Rs 1.10 lakh crore in the form of back-to-back loans to states for meeting the compensation shortfall. As per Centre’s estimates, Rs 63,000 crore is pending to states after back-to-back loans and IGST settlement.
Mr. Dhariwal, who represents the Rajasthan government in the GST Council, said on Thursday that the Finance Ministers of all States would “remain united” on these issues and raise them effectively before Union Finance Minister Nirmala Sitharaman at the GST Council’s meeting. Chief Minister Ashok Gehlot holds the Finance portfolio in Rajasthan.
The states reached a consensus “that the Union government should respect cooperative federalism”. The objective behind the meeting was to reach a common ground on issues that are likely to come up on May 28. In the meeting, the states also agreed that the additional borrowing limit should be increased to 5 per cent of GSDP.
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