Compensation Cess of ₹20,000 Cr To Be Given To States Tonight: FM

The meet of the GST council was expected to see non-BJP states push for a third borrowing option.

Updated
India
2 min read

Union Finance Minister Nirmala Sitharaman on Monday, 5 October, said that this year's compensation cess collected, amounting to Rs 20,000 crore, will be disbursed to the states tonight.

She also added that Rs 24,000 crore of IGST, that was to be released to the states which had received less earlier, will be disbursed by the end of next week.

Sitharaman was addressing the media on the outcome of the 42nd GST Council meet, that was held earlier in the day.

Further, Sitharaman said that the council has decided that compensation cess will be extended beyond five years.

However, having failed to reach a consensus on Monday, the council has deferred a decision on the mode of payment of pending GST compensation share of the states to 12 October.

The finance minister said that about 20-21 states chose the first option given by the Centre, that involved states borrowing to cover the compensation shortfall, while other states that did not choose any option wanted the Centre to borrow and pay the shortfall.

Sitharaman said that there was a discussion on this and it was felt that there was a need to talk further.

FM Sitharaman, however, provided assurance that the entire compensation would be paid back to the states and that compensation shortfall which has arisen due to GST implementation or due to COVID-19 would all be given back to the states.

The Council also decided that firms with up to Rs 5 crore turnover have to file only eight GST returns in a year from 1 January and also waived 18 percent GST for start-ups which use ISRO and Antrix Corporation services to launch their satellites.

The GST council meet on Monday was expected to see fireworks, with non-BJP states still being in disagreement with the Centre over its GST compensation model.

In September, the Centre had given states two options to either borrow Rs 97,000 crore from a special window facilitated by the Reserve Bank of India (RBI) or Rs 2.35 lakh crore from market.

The Centre had also proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.

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