GST council meeting on 12th oct : Read what happened

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The state representatives, including those governed by the Opposition parties, faced each other at the Goods and Services Tax (GST) Council meet which was chaired by Finance Minister Nirmala Sitharaman via video conferencing on 12th October 2020, to discuss the GST compensation for state governments for FY 2020-21.

The Centre had provided the states with two borrowing options to solve the issue of compensation dues. These are either borrowing the compensation amount arising from implementation of GST (₹97,000 crore) or the entire shortfall due to the states, which amounts to ₹2.35 lakh crore. The Centre said as many as 21 states were in favour of borrowing ₹97,000 crore to meet the GST revenue hit to state coffers. 

The GST Council concluded the discussion without reaching any consensus for the second time in two weeks. The Centre and states last meet on 5th October, but could not reach a consensus on the issue of borrowing to make up for compensation shortfall.

FM Sitharaman reiterated at meeting that the GST Council could take a call on extending the period of collecting the compensation cess to give out to states. However, the collection of cess is inadequate for paying compensation, and the shortfall will have to be met by borrowing.

The FM said that the Centre could facilitate states borrowing to help them obtain loans to meet the shortfall at reasonable interest rates, but would not borrow against the sovereign, which would ultimately raise borrowing costs for the entire economy, including the private sector.

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