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COVID-19 impact | GST consensus under threat over compensation to states

COVID-19 impact | GST consensus under threat over compensation to states

The Goods and Services Tax (GST) Council, which will meet later in July, is likely to witness sharp differences in opinion over the Centre's obligation to make up for state's GST losses. GST collections have fallen drastically owing to the coronavirus lockdown, which was imposed on March 25.

Some states, including Kerala, have been demanding that the Centre borrow from the market to pay dues to states. They contend that the borrowings can be repeated by extending the cess imposition on items like automobiles and tobacco beyond 2022, when these levies expire.

Bihar Deputy Chief Minister Sushil Kumar Modi, in an interview to Mint said that states need to be realistic about their compensation demands as the Centre is also facing revenue losses. Modi said the Centre can compensate states only from the revenue collected in the compensation cess fund, not from the Consolidated Fund of India.

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