Page 40 - GSTL_6th August 2020_Vol 39_Part 1

J22 GST LAW TIMES [ Vol. 39
for sufficient amounts to be credited to it,” argued a source In fact, Parliament
had rejected a proposal to mandate that the Centre pay the compensation gap
out of the Consolidated Fund of India.
Sources argued that there are only three options before the Council - ei-
ther increase the Compensation Cess or its ambit to include more goods and ser-
vices, or rationalise the rates, or borrow from the market. Sources indicated that
the States should borrow, and pay based on future receipts, instead of getting the
GST Council to borrow, as was proposed by some FMs.
[Source : The Times of India, New Delhi, dated 30-7-2020]

States face a longer wait for GST compensation of FY21
Similar to last year, this fiscal, too, States will have to wait for their GST
compensation, as the GST Council has not yet conducted the meeting of the
States scheduled for July. Probably, the wait could get much longer this time.
The Centre completed the payment of the full GST compensation for the
fiscal 2019-20 only by the end of July after keeping the States waiting for four
months. For the current year, probably, the States will have to wait more.
In the last GST Council Meeting, the Centre had promised to hold the
meeting in July to finalise the GST compensation. Prior to that, the States were
asked to send their proposals.
“By July 10, the States have sent their proposals. But the Centre has not
reached back to us on this, neither has it held the meeting that was scheduled for
the month of July,” T.M. Thomas Issac, Finance Minister of Kerala, told Financial
Chronicle.
“This is a breach of faith. If the Centre gives a word it should keep that
word,” he said, adding that he would take up the issue. Last year also Kerala had
raised the issue of delayed payment and even suggested that States should move
the Apex Court on this issue.
Issac presumes the Centre is probably waiting for the annual GST Re-
turns to get filed by September. “The Centre has not communicated anything.
But I assume they would be taking refuge in the fact that the final numbers of the
payment of GST returns are yet to come,” he said.
If that be the case, States will have to wait till September to finalise the
compensation and then for the payment.
This time, the demand for compensation would be higher from the States
due to a shortfall in revenues. The GST Compensation Act, 2017 guarantees a
14 per cent annual growth in tax revenues for the States from the amount collect-
ed by them in 2015-16 for five years till 2022. If there is a shortfall in revenue, the
Centre will compensate and for this, a Compensation Cess is levied on a few
luxury products, including SUVs.
“The compensation due for Kerala as per our proposal for the first three
months would come around ` 4,000 crore. Due to the shortfall in revenues the
monthly compensation, which used to be ` 700-` 800 crore has now gone up to
` 1,200 crore,” said Issac. For the entire FY20, the compensation received by Kera-
la was ` 8,111 crore.
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