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Sorry state: GST cess may stay for two years beyond FY22

Sorry state: GST cess may stay for two years beyond FY22

The Centre and states will likely resolve the vexed issue of a yawning deficit in the GST compensation cess fund by resorting to market borrowings this year, and finance it by retaining the cess for a year or more beyond the current end date of FY22. The borrowing requirement could be around `2 lakh crore, according to an FE estimate. If a state agrees to settle for a lesser compensation, given the unforeseen circumstance created by Covid-19, then the borrowing size would reduce.

But what could become a bone of contention as the GST Council discusses the issue at its next session is who will borrow – the Centre or the states or the GST Council.

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