Finance Ministers of States and Union Territories (UT) and senior officers from the Union Government and states will attend the meeting which will begin at 11 am today via video conferencing.
Finance Minister Nirmala Sitharaman will chair the 41st GST Council meeting today via video conferencing. The meeting will be attended by MoS Finance Anurag Thakur besides Finance Ministers of states & UTs and senior officers from Union Government & states: Ministry of Finance.
Finance Minister Nirmala Sitharaman will chair the 41st GST Council meeting today via video conferencing
The Hon’ble FM last announced a meeting for deliberating the single-point agenda of compensation cess in the previous GST Council meeting held on 12th June 2020. It was also announced that the meeting would be scheduled in July 2020. However, the date had not been confirmed so far.
Expectations from the 41st GST Council meeting
Compensation of GST revenue to states through borrowing. Currently, there is a shortfall in the compensation cess collected that has not been adequate to distribute the necessary revenue share promised to the states. The cess is imposed on sin goods and certain other luxury goods over and above the GST. The states have been guaranteed a five-year compensation with a 14% increase every year, presently extended up to 2022. The Council will discuss ways in which the shortfall can be met.
There are various options before the GST Council to fund the shortfall in revenue distribution to the states. These include market borrowings, increasing the scope of items subjected to the compensation cess or playing with the GST rates. Any increase in compensation cess on tobacco products such as bidis and cigarettes can earn a revenue of Rs.49,470 crore.
Recently, when the Central Government sought an opinion of the Attorney General of India, it had advised going for state borrowings to fund the deficit with the centre’s guarantee. It had also stated that the centre is not obligated to make the compensation. The market borrowings can be allowed on the base of the future receipts from the compensation fund.
Hence, the Council will most likely go for market borrowings. However, the states are in favour of bringing more items under the compensation cess kitty. The meeting may also evaluate the share of the centre and state in the revenue loss.