22nd January 2022

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GST Compensation conflict

  • On Tuesday, the Center allowed 20 states to raise ₹ 68,825 crore through open market loans to fill the GST income gap.
  • The decision was made a day after the GST Council meeting failed to reach consensus on the deadlock in the Center’s proposal that states borrow against future GST collections to fill the gap.
  • The projected total compensation deficit in the current tax is Rs. Rs 2.35 million lakh.
  • In August, the Center gave states two options: to borrow Rs. 97,000 crore from a special window provided by RBI or Rs 2.35 crore lakh from the market.
  • They had also proposed extending the compensation rate imposed on luxury, disability and sin products beyond 2022 to repay the loan.
  • The Expenditure Department of the Ministry of Finance has authorized 20 states to collect Rs. An additional 68,825 crore through open market loans, an official statement said Tuesday.
  • “An additional debt permit at a rate of 0.50% of the state’s gross domestic product (PIBD) has been granted to states that have opted for option 1 of the two options suggested by the Ministry of Finance to cover the deficit derived from the implementation of the GST ”, they said.
  • At the GST Council meeting on August 27, he said, these two options were raised and subsequently communicated to states on August 29.
  • Twenty states gave their preferences for option 1. These states are: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand. Eight states have not yet exercised an option, ” they said.
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