State finance secretaries have asked to send suggestions in a note and sought time of seven days, Finance Minister Nirmala Sitharaman said at the press briefing.
This arrangement will be for current year and the council will again look at the situation in April 2021, she said.
The current year has seen slowing down of economy due to Covid-19 which has led to low GST collections, said Finance Secretary AB Pandey today after the GST Council’s 41st meeting.
The Attorney General is of the view that compensation needs to be paid to states for five years. But this compensation gap has to be met from the levy of cess. Compensation cannot be paid from Consolidated Fund of India, the attorney general said, adding that levy of compensation can be extended beyond five years.
About Rs 3 lakh crore would be the need of compensation to be paid to states while compensation cess collected would be Rs 65,000 crore. There is an option to borrow the remaining Rs 2.35 lakh crore from the market, the attorney general said, according to Pandey.
April-July compensation is around Rs 1.50 lakh crore, Pandey said.
As the GST Council meeting is still in progress, the virtual media briefing is delayed. The briefing will commence after the GST Council meeting gets over. Inconvenience is regretted. https://t.co/9KQbxGLzDO
The Covid-19 crisis has further compounded states' fiscal problems. In a tweet, Kerala Finance Minister Thomas Isaac said, "The solution to GST embroglio is Central Govt to empower GST Council to borrow for meeting the compensation requirement, if necessary through an ordinance, on the strength of future receipts of an extended levy of compensation cess beyond 5 years by an appropriate notification.”
Ahead of the meeting, chief ministers of opposition-ruled states got together on Wednesday to devise a common strategy on the issue. Congress President Sonia Gandhi set the tone for the GST Council meeting by calling the centre's refusal to reimburse the states as nothing short of betrayal of the people by the Modi government.
