Finance Ministers of six non-BJP led states and Rajasthan Urban Development and Housing Minister Shanti Dhariwal met virtually on May 26 to discuss the extension of the GST compensation regime for five years beyond 2022 and other issues. The meeting comes two days ahead of the next GST Council meeting scheduled for May 28.

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The meeting was attended by the finance ministers of six states — Amit Mitra (West Bengal), Manpreet Singh Badal (Punjab), Rameshwar Oraon (Jharkhand), TS Singh Deo (Chhattisgarh), KN Balagopal (Kerala) and Palanivel Thiagarajan (Tamil Nadu).

Dhariwal is said to have demanded that the outstanding GST compensation amount be released to the states at the earliest, and all COVID-19-related goods should be made tax-free.

He urged all finance ministers to remain united on all these issues and raise them vigorously in the proposed GST Council meeting on May 28 before Union Finance Minister Nirmala Sitharaman.

All the states agreed that the Centre should release GST compensation amount of their share to the states while respecting the spirit of cooperative federalism so as to make up for the revenue deficit due to the states due to COVID-19, a statement said.

“We discussed the state of the economy and tax collections, and there was a commonality of opinion on all items. It is not just about the guaranteed 14 percent compensation support, but some states have gone below even last year’s GSDP levels. Pending compensation payments of over Rs 60,000 crore to states for previous fiscal and relief on COVID-related products were also discussed. We will take up these issues in the meeting,” TS Singh Deo told.

The ministers also agreed to increase the additional lending limit to 5 percent.

Meanwhile, the shortfall in GST compensation payable to states in the current fiscal is estimated at Rs 2.69 lakh crore, of which Rs 1.58 lakh crore would have to be borrowed this year.

The Centre expects to collect over Rs 1.11 lakh crore through cess on luxury, demerit and sin goods which will be given to the states to compensate them for the shortfall in revenue arising out of GST implementation.

The remaining Rs 1.58 lakh crore would have to be borrowed to meet the promised compensation to states under the Goods and Services Tax (GST) regime.

Under GST law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017.

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