GST consensus under threat as revenue falls

GST consensus under threat as revenue falls

Consensus has guided 40 meetings of the Goods and Services Tax (GST) Council since its inception, but differences between the Centre and fiscally stressed states within the federal tax body are becoming increasingly difficult to reconcile.

The Council, which will meet later this month, is set to see sharp differences emerge over the central government’s obligation to make up for states’ GST losses, which has gone up due to the two-month national lockdown to contain the coronavirus pandemic, a situation that wasn’t anticipated in GST laws.

States have for long been complaining about delays in getting their assured compensation. Some states such as Kerala have been demanding the Centre borrow from the market to pay dues to states. They contend that the Centre can repay the borrowings by extending the cess imposition on items such as automobiles and tobacco beyond 2022 when these levies expire.

Bihar deputy chief minister Sushil Kumar Modi, who is the convenor of several ministerial panels within the GST Council and is regarded as the go-to person for resolving disputes within the council, said in an interview that states may make statements for political reasons but they need to be realistic about their compensation demands as the Union government is also facing revenue losses.