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GST compensation deadlock: Centre allows 20 states to mobilise Rs 68,825 crore

October 14, 2020 admin Comments 0 Comment

The Centre on October 13 granted permission to 20 states to raise an additional Rs 68,825 crore through open market borrowings.

“Additional borrowing permission has been granted at 0.5 percent of the Gross State Domestic Product (GSDP) to those states who have opted for option 1 out of the two options suggested by the Ministry of Finance to meet the shortfall arising out of the Goods & Services Tax (GST) implementation,” the government said in a press release.

In the GST Council meeting held in August, two options were put forward. The 20 states that opted for option 1 are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand.

Eight states are yet to exercise an option, the statement said.

Out of the total Rs 68,825 crore, Andhra Pradesh has been allowed to borrow Rs 5,051 crore, Arunachal Pradesh Rs 143 crore, Assam Rs 1,869 crore, Bihar Rs 3,231 crore, Goa Rs 446 crore, Gujarat Rs 8,704 crore, Haryana Rs 4,293 crore, Himachal Pradesh Rs 877 crore, Karnataka Rs 9,018 crore, Madhya Pradesh Rs 4,746 crore, Maharashtra Rs 15,394 crore, Manipur Rs 151 crore, Meghalaya Rs 194 crore, Mizoram Rs 132 crore, Nagaland Rs 157 crore, Odisha Rs 2,858 crore, Sikkim Rs 156 crore, Tripura Rs 297 crore, Uttar Pradesh Rs 9,703 crore, and Uttarakhand Rs 1,405 crore.

The facilities made available to the states, who have submitted their choice, include a special borrowing window, coordinated by the Ministry of Finance, to borrow the shortfall in revenue through issue of debt. The total shortfall in the revenue of the states on this account has been estimated at around Rs 1.1 lakh crore.

The government has also included permission to borrow the final instalment of 0.5 percent of GSDP out of the 2 percent additional borrowings permitted by the government in view of the COVID pandemic, waiving the reforms condition.
The government had provided additional borrowing limit of up to 2 percent of GSDP to states. The final instalment of 0.5 percent out of this 2 percent limit was linked to carrying out at least three out of four reforms stipulated by the Centre.

“However, in case of states who have exercised Option-1, to meet the shortfall arising out of GST implementation, the condition of carrying out the reforms to avail the final instalment of 0.5 percent of GSDP has been waived,” the government statement said.

The 20 states, who have exercised Option-1, are eligible to raise an amount of Rs 68,825 crore through open market borrowings. Action on the special borrowing window is being taken separately, the statement said.

On October 12, the GST Council could not reach a consensus on borrowing options in lieu of compensation cess shortfall and Finance Minister Nirmala Sitharaman had said that some states questioned whether the Council has any authority to disallow those states that have already opted for one of the borrowing options from going ahead with their borrowing plans.

Source: Money-Control.

Entire GST shortfall will be compensated, says Centre

September 8, 2020 admin Comments 0 Comment

States and Union Territories will get full compensation for the shortfall in GST collection this year, the Centre reiterated on Monday. It made it clear that it will be irrespective of the fact whether the shortfall is on account of GST implementation or on account of the Covid pandemic. “It has never been the stand of the Union Finance Minister that the loss of revenue due to Covid would not be compensated. The Central government has, time and again, committed that the entitlement of the States would always be for full compensation. The entire compensation on account of the shortfall in collection of GST will be paid and honoured,” a senior Finance Ministry official said.

Total GST revenue shortfall during FY 2020-21 is estimated at ₹3-lakh crore. Since collection through the compensation cess is likely to be ₹65,000 crore, the net shortfall could be ₹2.35-lakh crore. Out of this, based on 10 per cent nominal growth and other assumptions, the shortfall on account of GST implementation and pandemic are ₹97,000 crore and ₹1.38-lakh crore, respectively. The Centre has proposed two options for States – borrow ₹97,000 crore through a special window or borrow the entire ₹2.35-lakh crore from the open market.

According to sources, working out revenue shortfall on account of GST implementation is just a mechanism to assess how much of the shortfall should be met by borrowing and how much could be deferred. Borrowing for meeting the entire shortfall when the private sector is struggling to stand back on its feet could hurt them badly. If States go for option 1 and borrow ₹97,000 crore, it does not mean they will have to forego the remaining compensation. The remaining compensation will be paid to states after the above borrowing has been fully repaid. Therefore, “where is the doubt about the Centre not meeting its commitment,” asked the official.

Under the GST law, the compensation cess is a tax owned by the states and under Article 292 of the Constitution of India, the Centre can borrow on the security of its own taxes and resources which is Consolidated Fund of India. It cannot borrow in the security of the tax which it does not own, the official explained.

Source: thehindubusinessline.

Centre gives states two options to meet GST compensation cess shortfall

August 28, 2020 admin Comments 0 Comment

The Centre on Thursday offered two options to states to compensate them amid inadequate cess collections under the goods and services tax (GST) regime.

One was an offer of a special window to states, in consultation with the Reserve Bank of India (RBI), to the tune of Rs 95,000 crore at a reasonable interest rate. The other was for states to borrow Rs 2.35 trillion from the market, with the RBI as a facilitator.

However, the burden of repayment will not be on states. The timeline for cess imposed on sin and luxury goods will be extended beyond June 30, 2022 (up to which states are Constitutionally guaranteed compensation), to help service the debt.

Finance Minister Nirmala Sitharaman told the media that the Centre would facilitate the borrowing, by talking to the RBI. This is to ensure individual states do not rush to the market and raise bond yields.

According to government estimates, Rs 97,000 crore is the shortfall in compensation, as given in a formula under the law, with Rs 2.35 trillion the overall deficit factoring in the Covid situation.

Finance Secretary A B Pandey said collections from the compensation cess were estimated at Rs 65,000 crore for FY21. While the target for compensation under the law is Rs 1.62 trillion, accounting for the impact of Covid-19, the requirement stands at Rs 3 trillion, he added.

The Centre will provide details to states in a couple of days, and they will return to the next proposed Council meeting with their choice, said Sitharaman.
The borrowing mechanism will be there for FY21, after which it will be reviewed in April 2021, said Pandey.

States are guaranteed full compensation for the first five years of the GST regime in case they fail to record 14 per cent growth in revenues from GST on the base year of FY16. They are yet to get a rupee of compensation in FY21 against the requirement of Rs 1.5 trillion for the first four months, said Pandey.

Asked about the issue of raising cess or expanding the same, Sitharaman said the matter was not discussed in the meeting.

As to what the incentive is for states to go for just Rs 97,000 crore and not the entire Rs 2.35 trillion, the FM said it was up to them because some may not like to borrow the amount of shortfall caused by ‘act of God’ Covid-19.

Further, she disclosed that states would be given additional unconditional leeway of 0.5 percentage points of the GDP, as any additional borrowing will lead to fiscal deficit concerns.

States have already been given an unconditional 0.5 percentage point leeway over and above the 3 per cent under the Atmanirbhar Bharat package. Overall, they have been given a two-percentage-point flexibility, though the remaining 1.5 percentage points are based on riders like initiating power sector reforms, and taking steps towards ‘one nation one ration card’.

The GST Council meeting was called to discuss the single-point agenda of compensating states. The Centre also took the opinion of Attorney General K K Venugopal, who advised against taking recourse to the consolidated fund of India for compensating states. Governments — both the Centre and states — collected Rs 21,747 crore from the compensation cess in the first four months of FY21, which was two-thirds of the Rs 32,796 crore mopped up in the corresponding period of FY20.

In fact, collections were muted in the last financial year too. The collection was Rs 95,000 crore but states were given Rs 1.65 trillion after dipping into excess collections from cess of previous

Source: Business-Standard.

GST Council To Explore Making E-Way Bills Must For Moving Gold Within States

August 17, 2020 admin Comments 0 Comment

A Group of Ministers has agreed that states can individually decide to make e-way bills mandatory for the movement of gold within their territory to check tax evasion.

The panel decided that if states want to implement the e-way bill mechanism for gold and precious stones, they can do so for intra-state movement of the commodity, Thomas Isaac, Kerala finance minister and head of the panel; and Bihar Deputy Chief Minister Sushil Modi, a member of group, told BloombergQuint.

Currently, inter-state movement of goods over Rs 50,000 requires an e-way bill but gold is exempt. Given tax evasion and smuggling of gold, the GST Council created a group of ministers to examine if implementing the e-way bill mechanism for gold and precious stones is feasible. GST on gold is levied at 3% while precious stones and diamonds are taxed at 0.25%-3% .

The legal changes required to make e-way bill generation compulsory for intra-state movement of gold, and a monetary threshold for gold will be worked out by the officials of Department of Revenue, Modi said. The proposal will then be taken to the GST Council for its final approval.

Isaac told BloombergQuint that a proper tax administration is needed for gold. States like Gujarat, known for gold and diamond industry, had reservations about data of transportation of gold and diamonds being revealed if e-way bill system is implemented as it tracks the transport of goods, he said.

The panel agreed to implement the system within a state and secrecy of movement of goods will be maintained, with only commissioner-level officials dealing with the information, Isaac said.

The panel was not in favour of making e-way bills mandatory for inter-state movement of gold as it’s “not feasible” and will complicate the system, Modi said.
E-way bill generation for inter-state movement of gold and precious stones may lead to security concerns as such consignments would be tracked, according to a government official.

Tax evasion in gold is rampant, and the government needs to come up with some framework to control it, Rajat Mohan, a partner at AMRG & Associates, told BloombergQuint. “Implementation of e-way bill system for intra-state movement of gold will help in restricting tax evasion as trade in the commodity mostly happens within a state.”

Besides, Isaac and Modi, the panel includes Gujarat Deputy Chief Minister Nitin Patel; Karnataka Home Minister Basvaraj Bommai; and Manpreet Singh Badal and Amit Mitra, finance ministers of Punjab and West Bengal.

The ministers have yet to submit their final recommendations to the GST Council, and will also explore if e-invoicing system—that’ll be implemented from Oct. 1—can be extended for gold, Modi said.

There’s a proposal to make e-invoicing and e-billing mandatory for jewellery shops, Isaac said. To check smuggling of gold, a reverse tax will be proposed on sale of the old yellow metal, he said. Currently, smuggled gold is sold as old gold, and a tax under the reverse-charge mechanism tax would mean the buyer will have to pay tax, for which he can claim credit, Isaac said. “This will help in keeping a check on smuggled gold that has doubled to about 2,000 kg in 2019-20.”

Source: Bloomberg-Quint

CBIC enables Functionality to file Revocation Application for cancelled GST Registration

August 11, 2020 admin Comments 0 Comment

The Central Board of Indirect Taxes and Customs ( CBIC ) has enabled the Functionality to file revocation application for canceled GST Registration.

In an advisory issued by CBIC said that, “In view of the Removal of Difficulty Order No. 01/2020 dated 25.06.2020, the restriction on filing revocation application, in case it was rejected, has been removed. Aggrieved taxpayers can file an application for revocation of cancellation of registration once again”.

The CBIC also said that, Further, those taxpayers who have filed Appeal against rejection of the Revocation Application and the decision is still pending, they may also file the Revocation of Cancellation.

The Taxpayer is required to log in and navigate to Services> Registration> Application for Revocation to file the application for revocation.

The GST Council had decided to provide an opportunity to revoke the cancellation of GST Registration. The Finance Minister Nirmala Sitharaman had said that the Taxpayers who could not get canceled GST registrations restored in time are being given an opportunity to apply for revocation of cancellation of registration up to September 30, 2020, in all cases where registration has been canceled till June 12, 2020.

Source: TaxScan

GST Compensation to States likely to get a Five-Year Extension

July 17, 2020 admin Comments 0 Comment

Witnessing a sharp decline in the GST revenue due to the pandemic and the following lockdown and disruptions in economic activities across the country, the States are likely to request the Centre for an extension in the GST compensation period, by up to five years beyond FY22.

The GST Council is expected to meet this month to discuss alternative compensation mechanisms, amid inadequate cess collections. Reports said that the States may write to the 15th Finance Commission, seeking the extension. They are likely to point out the challenge in meeting routine expenditure after 2022, in the absence of any compensation.

Coming out of the first GST Council taking place against the backdrop of COVID-19 pandemic, Finance Minister Nirmala Sitharaman said that the Council decided to meet again in July with single-point agenda to discuss compensation cess.
“If there is a need for borrowings to meet compensation to states, who are going to borrow. How we are going to pay for it…,” she said about next meeting of the Council, hinting that fall in revenues has become a big cause of concern for the Centre to meet its liability towards the states as per GST legislation.

Under GST law, states are guaranteed full compensation for any revenue loss for the first five years after the introduction of the goods and services tax (GST) in July 2017. The compensation is the gap between the actual revenue collected and projected revenue. The projected revenue is revenue growth of 14 per cent for states per year over the base year 2015-16.

As per the GST Act, full compensation to the states has to be paid for a period of five years till FY22 only through the compensation fund that gets its funds through the levy of GST compensation cess on few items. However, with the fund not getting enough collections since August 2019, GST compensation to states have been delayed with Centre now looking at getting GST Council nod for a mechanism to finance the compensation.

After February, when the Centre released GST compensation of Rs 19,950 crore for the months of October and November 2019, it has cleared dues for December, January and February only now.

The monthly compensation requirement for states in 2020-21 is being pegged at Rs 20,250 crore, government sources said, leaving a big gap between what needs to be paid and what is being collected. Even in FY21, monthly cess collections could be a low of Rs 7,000-8,000 crore or lower.

Source: TaxScan.

GST mop-up hit by Covid, ‘act of God’: Centre

June 19, 2020 admin Comments 0 Comment

Amid the chorus for GST compensation from states, the Centre has conveyed that there is a need to factor in the “abnormal situation” due to the coronavirus pandemic, which it described as an “act of God”, indicating that there was no insurance for 14% growth in GST collections during these times.

Three years ago, while introducing GST, the Centre had promised to compensate states for “revenue loss”, if collection growth was under 14% in a year. “Compensation is a larger issue. The Centre is not going back on its promise, but should it not enforce the force majeure clause since this is an event triggered by things beyond anyone’s control? It is an ‘act of God’,” an official told TOI.

Data presented at the GST Council meeting on Friday showed that GST collections had shot up to over Rs 62,000 crore in May — almost twice the level seen in April — but 38% lower than a year ago. A large part of the sequential jump was attributed to payments for April spilling over into May given the extended deadline. In any case, the actual numbers will only be known after a few months as the Centre is not enforcing the payment and filing deadline.

While collections during April and May have been around 45% of monthly average (of a shade over Rs 1 lakh crore), is it fair for the states to demand 114%?” said a source. “Haven’t their VAT, excise and property tax collections suffered,” added another source.

The Centre has, however, agreed to look into the issue of compensating states after finance minister Nirmala Sitharaman suggested in March that the Council could look at the option of market borrowings. On Friday, her party colleague and Bihar deputy chief minister Sushil Kumar Modi is learnt to have pointed this out.

A state finance secretary told TOI that “invoking the force majeure clause” was not provided for in the statutes, although the Centre has made it clear that the GST Council needs to arrange for the compensation. “Technically, they (Centre) are right. They are in no position to pay, given that there was a shortfall last year too,” the official said.

A state finance minister conceded that it may not be possible for the Centre to compensate if a state fails to achieve 14% annual growth in GST collections. “Pre-lockdown too, there was a massive gap because 14% growth was assured. The gap will rise given the economic situation,” the minister said.

In fact, during the GST Council meeting in Goa too, the issue had been flagged since the average GDP growth had slowed down from the earlier highs. “To achieve 14% GST growth, with GDP growth of 6% is tougher than at 8-9%,” a state revenue secretary added.

Source: Economic-Times

GST Council to discuss waiver of late fee for August 2017 to January 2020

June 2, 2020 admin Comments 0 Comment

The GST Council in its next meeting will discuss waiver of late fee for non-filing of GST returns for August 2017 to January 2020 period.

In a tweet, the Central Board of Indirect Taxes and Customs (CBIC) said, “Issue of GST late fee for the past period (August 2017 to January 2020) to be discussed in the next GST Council meeting.”

The next meeting of the GST Council is likely to be held on June 14.

The CBIC said there have been demands for waiver of late fee for returns which were required to be filed from the beginning of Goods and Services Tax, that is August 2017.

For helping small businesses, having turnover of less than Rs 5 crore, in the current situation arising out of COVID-19, Finance Minister Nirmala Sitharaman had already announced extension of GST returns of February, March, April and May 2020 till June 2020. No late fee will be charged for this period, it said.

The CBIC said late fee is imposed to ensure that the taxpayers file return in time and pay taxes on the amount collected from buyers and due to the government.

This is a step to ensure that a certain discipline is maintained regarding compliance. Honest and compliant taxpayers would be discriminated negatively in the absence of such a provision, it added.

“In GST all decisions are taken by the Centre and the state with the approval of the GST Council. It would not be possible or desirable for the Central government to unilaterally take a view on this issue and therefore, the trade is informed that the issue of late fee would be taken up for discussion in the next GST Council meeting,” it said.

Source: Economic-Times

GST Council Likely To Meet In Second Week Of June

May 28, 2020 admin Comments 0 Comment

The GST Council is likely to meet in the second week of June according to media reports. The Council meeting will discuss the impact of the coronavirus pandemic on the economy of states, among other things.
The meeting of the GST council comes in the wake of repeated requests from state chief ministers in their video interactions with the Prime Minister for releasing dues to the states.

The GST council meeting is likely to discuss steps to raise compensation collections to clear the dues of the states. It is also likely to take up GST revenue trends which have hit rock bottom during the lockdown period following the outbreak of the coronavirus pandemic.
The GST Council is an apex member committee which was formed to modify or reconcile any law based on goods and services tax in the country. The council is headed by Union Finance Minister Nirmala Sitharaman and comprises finance ministers of all the states of the country.

The scheduled GST Council meeting could turn out to be a stormy one in the light of the fact that several states have been batting for higher allocations. Chief Ministers of several states had also stressed on the need to release GST dues in their video interactions with Prime Minister Narendra Modi.

Source: The-Hans-India

GST compensation to states pending for Dec-March FY20

May 18, 2020 admin Comments 0 Comment

Finance Minister Nirmala Sitharaman on Sunday said GST compensation is due to all the states for the four-month period of December-March. “We are periodically talking about it. GST dues are very clearly explained in the GST Council. It is not for selective states… All states’ GST dues which we recognise for December, January, February, March have not been paid,” Sitharaman told reporters here.

Under GST law, states are guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss. There were no differences between the Centre and states with regard to compensation payment in 2017-18, 2018-19 and in the first four months (April-July) of the previous fiscal (2019-20).

However, with revenue mop-up from compensation cess falling, the Centre held back fund transfer to states beginning August. Following this, states raised the issue with the Centre and in December 2019, Rs 35,298 crore was released as compensation for August-September, while Rs 34,053 crore was released in two instalments in February and April as compensation for October-November.

The Centre has, so far, released over Rs 2.45 lakh crore as GST compensation to states since the implementation of the new indirect tax regime on July 1, 2017. During July 2017-March 2018, Rs 48,785 crore was released, while between April 2018-March 2019, Rs 81,141 crore was paid to states.

For April-May and June-July last year, Rs 17,789 crore and Rs 27,956 crore were released. Further, Rs 35,298 crore was paid to states as compensation for August-September and Rs 34,053 crore for October-November 2019.

Source: Times-now-news

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GST compensation deadlock: Centre allows 20 states to mobilise Rs 68,825 crore

October 14, 2020 admin Comments 0 Comment

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Entire GST shortfall will be compensated, says Centre

September 8, 2020 admin Comments 0 Comment

XaTTaX is Best GST Software, Simplify your Financial matters with GST eFiling Software for Return Filing & GST Billing Software in India.

Centre gives states two options to meet GST compensation cess shortfall

August 28, 2020 admin Comments 0 Comment

XaTTaX is Best GST Software, Simplify your Financial matters with GST eFiling Software for Return Filing & GST Billing Software in India.

GST Council To Explore Making E-Way Bills Must For Moving Gold Within States

August 17, 2020 admin Comments 0 Comment

XaTTaX is Best GST Software, Simplify your Financial matters with GST eFiling Software for Return Filing & GST Billing Software in India.

CBIC enables Functionality to file Revocation Application for cancelled GST Registration

August 11, 2020 admin Comments 0 Comment

XaTTaX is Best GST Software, Simplify your Financial matters with GST eFiling Software for Return Filing & GST Billing Software in India.

GST Compensation to States likely to get a Five-Year Extension

July 17, 2020 admin Comments 0 Comment

GST mop-up hit by Covid, ‘act of God’: Centre

June 19, 2020 admin Comments 0 Comment

GST Council to discuss waiver of late fee for August 2017 to January 2020

June 2, 2020 admin Comments 0 Comment

GST Council Likely To Meet In Second Week Of June

May 28, 2020 admin Comments 0 Comment

XaTTaX is Best GST Software, Simplify your Financial matters with GST eFiling Software for Return Filing & GST Billing Software in India.

GST compensation to states pending for Dec-March FY20

May 18, 2020 admin Comments 0 Comment