Compensation Cess of ₹20,000 Cr To Be Given To States, UTs, Says FM Sitharaman

Cash starved states and  Union Territories feel relieved following the Centre’s decision to urgently disburse about 20 thousand crore rupees among them from the amount collected as compensation cess this year. Finance Minister Nirmala Sitharaman made the announcement after the 42nd GST Council meet in Delhi on October 5. Briefing media She said that by next week, the Centre will also disburse Rs. 25 thousand crore towards Integrated GST for 2017-18 to those states that received less amount due to the anomalies. The GST Council also recommended the extension of Levy of Compensation Cess beyond the transition period of five years which is beyond June 2022, for such period as may be required to meet the revenue gap.  Sitharaman informed that the GST Council has deferred the decision on the mode of payment of pending GST compensation share of the states to 12th October meeting of the Council. The  GST Council has comprising finance ministers of all the states and UT deferred the decision on the mode of payment of pending GST compensation share of the states to 12th October meeting of the Council. She said that about 20 to 21 states chose the option given by the Centre which allowed the states to borrow to cover the compensation shortfall. Chief Ministers of West Bengal, Kerala, Delhi, Telangana, Chhattisgarh and Tamil Nadu have written to the Centre opposing the options which require states to borrow to meet the shortfall. Attorney General of India KK Venugopal had given legal view on the compensation cess issue saying that there is no obligation on the Centre under the GST laws to compensate for the loss of revenue. He also opined that the GST Council has to find ways to meet any revenue shortfall arising out of GST implementation. The payment of GST compensation to states became an issue after revenues from the imposition of cess started dwindling since August 2019. As these states want the Centre to borrow to meet the shortfall, the Federal Government has argued that the revenue accruing from GST compensation cess goes to the states and the Centre cannot borrow on the security of the tax it does not own. Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. It has also been decided that starting from 1st January next year, taxpayers with less than Rs. 5 crore annual turnover will not be required to file monthly GSTR-1 and GSTR-3B returns. They will now have to file it on a quarterly basis.

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