Rs 20k cr cess to be disbursed to states: FM

Rs 20k cr cess to be disbursed to states: FM
Nirmala Sitharaman hairs the 42nd GST Council meeting via video conferencing in New Delhi, Monday, Oct 5.
NEW DELHI, OCT 5 (AGENCIES) | Publish Date: 10/5/2020 1:22:56 PM IST

Union finance minister Nirmala Sitharaman on Monday said that Rs 20,000 crore compensation cess will be disbursed to the states. Compensation cess is given by the Centre to states for revenue losses.

The finance minister while addressing the media after the 42nd GST Council meet stated that this year’s cess amount will be disbursed tonight.

The government will further extend a surcharge on taxes on luxury goods including cars and tobacco products beyond 2022, under plans to help states repay loans raised to meet revenue shortfalls in the current fiscal year, Sitharaman said.

“The GST Council has approved to extend the cess (surcharge) beyond five years,” Sitharaman added.

The surcharge on luxury goods such as cars and tobacco products, which varies from 12 per cent to 200 per cent, is part of the national goods and services tax (GST) introduced in 2017, and was due to expire in 2022.

Finance secretary Ajay Bhushan Pandey said that from January 1, taxpayers whose annual turnover is less than Rs 5 crore will not be required to file monthly returns (GSTR-3B and GSTR-1). They will only file quarterly returns, he added.

The finance secretary stated that the council’s decision to make small taxpayers pay returns on a quarterly basis rather than monthly will be a major relief. Number of returns comes down from 24 monthly returns to just 8 from next year, he further mentioned.

The finance secretary also said that the council has decided to exempt satellite launch services by ISRO and Antrix.

The next meet will be held on October 12 to further deliberate on compensating states for GST cess shortfall, finance minister Sitharaman concluded.

Earlier today, the GST panel had increased borrowing limit of Rs 1.1 lakh crore instead of Rs 97,000 crore in the first borrowing limit to states. The council has approved extension of the GST compensation cess levy beyond 2022.

Thematics of Impasse: In September, the Centre had given the states two options- either borrow Rs 97,000 crore from a special window facilitated by the Reserve Bank of India or Rs 2.35 lakh crore from the market. Opposition ruled states are yet to accept either of the two options and are vehemently pushing for a third option, while maintaining that the onus is on the centre to make up for the shortfall in revenue collection.

Dispute redressal mechanism: Terming the two options as a “Threat” whereby, they (opposition states) might not be compensated if they do not choose either of the two options. 

The states are batting for a dispute redressal mechanism within the council and for a Vice Chairman to be added to the council.

Centre’s estimates: Government’s estimates have pegged the GST compensation requirement at around Rs 3 lakh crore this year, while the cess collection is expected to be around Rs 65,000 crore — an estimated compensation shortfall of Rs 2.35 lakh crore (assuming a 10 per cent revenue growth over last year).



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