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GST Council to discuss ways to address revenue shortfall, but sweeping rate hike unlikely soon

GST Council to discuss ways to address revenue shortfall, but sweeping rate hike unlikely soon

The Good and Services Tax (GST) Council on Friday may consider the option of borrowing from the market to bridge the compensation cess fund deficit, and ensure states’ revenue is protected under GST regime. The Council would also resume discussions on ways to shore up revenue which includes moving some items to higher slabs or raising the existing slabs.

Sources in the central government said that market borrowing could be repaid by collection of cess in the sixth year or subsequent years, according to discussions within the ministry. However, a senior state government official said that the option would be hard to implement because of operational issues such as the legality of GST Council as a borrower and ambiguity about the guarantor.

Another top state official said that many states have come to accept that only available resources in compensation cess fund would come to states as other options, including rate hikes, might not be practical. “Rate hike would make sense only if some slabs are done away with and a simpler structure emerges, otherwise it would be an exercise of two steps forward and one back,” he said.

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