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The 42nd GST council meeting was held on 5th October 2020 as well as on 12th October 2020. The meetings were chaired by Finance Minister Smt. Nirmala Sitharaman, Union Minister of State for Finance and Corporate Affairs Shri Anurag Thakur was also present at the meeting, besides the Finance Ministers of the states and union territories (UTs), and other senior officers of both, the Ministry of Finance and the States and UTs.
After an almost 8-hour long meeting, the Council failed to reach a consensus on the issue of borrowing to make up for the compensation cess shortfall on 5th October 2020. Hence, the Council met up again on 12 October 2020 to resolve compensation issues for the states.
28th May 2021
43rd GST Council meeting took place on 28th May 2021 (Friday) at 11 A.M. via video conferencing and was chaired by Union FM Nirmala Sitharaman The Council recommended that the GST amnesty scheme be re-introduced, late fee was rationalised, import of COVID equipments will attract nil IGST whether or not imported at free of cost.
1. The 43rd GST Council meeting ended with no unanimity on the borrowing issue. Hence, no conclusion was reached. The states may go ahead with borrowing funds as per the options previously given.
2. The levy of compensation cess will continue beyond the 5-year period, as was announced in the 42nd GST Council meeting.
3.The centre will not be able to borrow funds to meet the compensation cess shortfall as this will result in an increase in the yield on G-sec bonds.
4. The Finance Minister explained that the Centre has issued a borrowing calendar, and if it goes beyond it to borrow, the G-Sec deals used as a benchmark for every other borrowing will go up. This will increase the borrowing costs for states and the private sector as well.
5.It was also clarified in the press briefing that the cess collected July 2022 onwards will not be disbursed to the states and the same will be utilised solely for the purpose of repayment of interest and principal. Hence, there will be no burden on the states regarding repayment of the borrowings made.
In the 42nd GST council meeting, GST council discusses the pressing compensation cess issue and other matters with regard to ease of return filing and GST rate reduction. Here is the list of highlights of the 42nd GST council meeting.
The 42nd GST Council meeting first took place on 5th October 2020. The meeting was held for the states to finalise one of two options given to them by the GST council, to meet the compensation cess shortfall.
Option I – The Centre will facilitate an amount of Rs 97,000 crore to the states as borrowings, through a special window by the Reserve Bank of India (RBI). This borrowing is to be repaid after a period of five years, along with a reasonable rate of interest.
Option II- The states can borrow the entire shortfall of Rs.2.35 lakh crore directly from the RBI. These options were announced in the 41st GST Council meeting held on 27th August 2020.
The states were given seven days to evaluate and confirm one of the options that they were going ahead with.
However, the 42nd Council meeting got pushed to 5th October. A few of the states decided to go ahead with option 1 or 2 as laid down by the Council, but other states such as Delhi, Punjab, Rajasthan, Chhattisgarh, Tamil Nadu, Jharkhand, Telangana, Puducherry, Kerala and West Bengal were not in favour of either. In the 42nd GST Council meeting, the GST Council agreed to increase the borrowing limit under Option 1 to Rs.1.10 lakh crore based on a 7% revenue growth rate, as against the previously decided 10% growth rate, which amounted to Rs.97,000 crore. However, even after an almost 8-hour long meeting, the Council failed to reach a consensus on the whole borrowing issue. Today, the GST Council will meet again to decide on a solution that is feasible and acceptable to all the states. If not, the Council will need to go in for voting amongst its members to finalise an option.
The most awaited solution for the GST compensation cess would arrive in today’s GST council meeting. It was decided in the 41st GST Council Meeting that there will be another short Council meeting to finalise one of the two options provided by the Central Government about GST compensation cess.
Initially, the states have given only seven working days from the end of 41st GST council meeting to evaluate both the options and to get back to the Council with a final option. However, due to various reasons, the Centre has postponed the council meeting to 5th October 2020.
The outcome of the 41st GST Council meeting which was held on 27th August 2020 is as follows:
The annual compensation cess shortfall for the FY 2020-21 works out to be Rs 2,35,000 crore. Out of the total, Rs 97,000 crore is the shortfall due to GST implementation. The rest of shortfall is considered as due to COVID-19, which is an act of god.
Finally, the states have been provided with below two options to meet the shortfall of compensation cess.
Option I- The Centre will facilitate Rs 97,000 crore to states as borrowings, through a special window by the Reserve Bank of India (RBI). This borrowing has to be repaid after five years along with a reasonable rate of interest.
Option II- The states can directly borrow from RBI to a tune of Rs 2,35,000 crore.
While few states opted for either of the 2 options, few states like Delhi, Punjab, Rajasthan, Chhattisgarh, Tamil Nadu, Jharkhand, Telangana, Puducherry, Kerala and West Bengal are not in favour of either option.
In today’s GST council meet, the Council would arrive at a feasible solution which can be agreed by all the states or else the Council has to go for voting among members to finalise the options.