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Gst Council To Meet Again On Oct 12 Over Compensation Plan

Author: Finapolis Network/Wednesday, October 7, 2020/Categories: Tax

Gst Council To Meet Again On Oct 12 Over Compensation Plan

GST compensation cess to be levied beyond June 2022

New Delhi: The GST Council will meet again on October 12 to discuss and try to reach a consensus between state governments and the Centre on the borrowing options for GST compensation, the Finance Minister Nirmala Sitharaman said.

Even with consensus eluding a decision on the new formula to pay GST compensation to states, the 42nd meeting of the GST Council on October 5 decided to extend the period of compensation cess beyond the five year transition period slated till June 2022 to meet the revenue gap. Originally, the cess was to be levied till June 2022 to compensate the states for the revenue gap that emerged from the transition to the Goods and Services Tax (GST) regime in 2017. The extension would mean that cess would be collected for few more years to pay compensation dues of states arising between April 2020 and June 2022.

The decision, though beneficial for the states, comes as a setback for businesses which will have to pay the cess to compensate the states. Among other major decisions, Finance Minister Nirmala Sitharaman said that the Centre will release compensation of Rs 20,000 crore (the amount collected from cess so far this fiscal) to states towards loss of revenue during 2020-21 by Monday night and an amount of about Rs 25,000 crore towards IGST of 2017-18 by next week.

As a further step towards reducing the compliance burden, particularly on the small taxpayers having aggregate annual turnover of Rs 5 crore, the Council's earlier recommendation of allowing filing of returns on a quarterly basis with monthly payments by such taxpayers will be implemented with effect from January 1, 2021. The decision taken to meet again in October was suggested by Bihar Deputy Chief Minister and Finance Minister Sushil Modi, after the Council's Monday meet failed to break the deadlock between the Centre and the state governments on the issue of compensation. Addressing a press conference after the meet, Sitharaman said that only because 20 states accepted Option 1, does not mean that it can be thrust upon others. "We need to talk further."

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