41st GST Council Meeting
The GST council is the chief decision-making body that takes all important decisions about the GST regime. The 41st GST council meeting was held on the 27 of August 2020 through video conferencing. This meeting was chaired by the Union Finance Minister Nirmala Sitharaman in the presence of the Attorney General.
Outcome of the 41st GST Council Meeting
- The shortfall in the compensation cess for FY 2020-21 is adding up to INR 2,35,000 crore. Out of this, INR 97,000 crore is due to the implementation of GST., The balance in the deficit can be attributed to the economic downfall due to the pandemic in the country which is an extraordinary situation - ‘an act of god’.
- This composition is only available for the FY 2020-21. In early April 2021, the GST council will re-vale the financial condition of the states and then, revised decisions will be taken accordingly.
- The two options given to the states would mean:
- Option 1: Borrow less now & get cess later. Here, the compensation entitlement will be protected.
- Option 2: Borrow more now to cover the total shortfall & pay for it using cess collected during the transition period.
- The 41st GST council meeting had no discussions about GST rate revision.
There may be a brief meeting soon to decide on the options offered to the States in the 41st GST Council meeting. However, as per sources, the 42nd GST council meeting may be on the 19 of September 2020.
Expectations from the 41st GST Council Meet
This meeting is going to focus on providing compensations to states, for the revenue losses incurred under the Indirect Tax regime.
- The Goods and Service Tax act levied the ‘Compensation Tax’ to compensate for the losses incurred by various states because of the implementation of GST. This cess was prescribed to be collected on the supply of selected goods and/or services till 1 July 2022.
However, due to the prevailing situation in the country and economic downfall, the collection of this cess has decreased. Understanding this, the council members may work out a reasonable plan to balance the liabilities between the centre and state.
- The council may consider options like - market borrowing, and/or addition of more items under the purview of compensation cess, and/or re-working on few tax rates.
- This meeting may also chalk out the centre’s and state’s share in the loss sharing.
- As quoted in the 40th GST council meet, this meet may clarify the payment parameters, if there is borrowing.
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