At 41st meeting of the GST council Finance Minister Nirmala Sitharaman gave two options to choose, to compensate states for the revenue shortfall. Nirmala Sitharaman said the council discussed two options of compensating states for the current fiscal and has decided to give seven days to choose from the two. The GST Council will look at the issue again in April next year. She said the economy is facing an extraordinary ‘Act of God’ situation, which may result in economic contraction.
Revenue secretary Ajay Bhushan Pandey said, in the first option, a special window can be given to the states, in consultation with the RBI, at a reasonable interest rate for the borrowing of Rs 97,000 crore. The amount can be repaid after five years( of GST implementation) ending 2022 from cess collection. The second option is to borrow the entire Rs 2.33 lakh crore shortfall under the special window.
He said the GST collection was crashed due to covid pandemic. Shortfall in FY21 stood at Rs 2.35 lakh crore of which Rs 97,000 crore was due to implementation of GST while rest due to virus outbreak. The compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Hence the total shortfall is estimated at Rs 2.35 lakh crore.