GST deadlock remains, compensation for tax collected to be released tonight

Finance Minister Nirmala Sitharaman chairs the 42nd GST Council meeting via video conferencing in New Delhi
The Goods and Services Tax (GST) Council will meet again October 12 after talks on Monday failed to resolve how states be compensated for their loss of revenue. As the deadlock between states and the centre continued, Finance Minister Nirmala Sitharaman said compensation for tax collected will be released tonight.

"Ten states demanded that full compensation should be paid to the states during the current year as per clauses in the law and centre should borrow. Decision was postponed to the next meeting on 12th of October," said Kerala’s finance minister Thomas Isaac after the meeting.

"Compensation cess collected this year so far--amounting to approximately Rs 20,000 crore--will get disbursed to all states tonight," said Sitharaman at a press briefing separately.

A further Rs 24,000 crore of IGST (integrated goods and service tax) will be released by the end of next week to states that received less earlier, Sitharaman said.

The meeting, conducted via video conference, was held to consider the two borrowing options offered to states in August to meet their shortfall in GST collections. Both the borrowing options involve raising debt by states on different terms.

GST collections rose to Rs 95,480 crore in September - the highest level since the lockdown - in signs of a revival of economic activity and demand returning from the lifting of restrictions. The GST collections were almost 4 per cent more than the September 2019 collection of Rs 91,916 crore and nearly triple of April 2020 mop-up. Also, they were 10 per cent higher than the August 2020 collection.

The finance ministry had said in a statement that the gross GST revenue collected in September 2020 was Rs 95,480 crore, of which Central GST was Rs 17,741 crore, State GST Rs 23,131 crore, Integrated GST Rs 47,484 crore (including Rs 22,442 crore collected on import of goods) and cess Rs 7,124 crore (including Rs 788 crore collected on import of goods).

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