Page 42 - GSTL_6th August 2020_Vol 39_Part 1

J24 GST LAW TIMES [ Vol. 39
Responding to this, the then Chairperson and Union Finance Minister
Arun Jaitley had assured that “compensation to States shall be paid for five years
in full within the stipulated period of five years and, in case the amount in the
GST compensation fund fell short of the compensation payable in any bi-
monthly period, the GST Council shall decide the mode of raising additional re-
sources including borrowing from the market which could be repaid by a collec-
tion of cess in the sixth year or further subsequent years.”
Parliament had approved an amendment to the Constitution that ena-
bled subsuming of over a dozen different Central and State taxes into the new
tax regime, which provides for GST compensation to States for loss of revenue on
account of GST implementation for a period of five years.
“There is no obligation under the Constitution or GST laws to make
good the loss on account of natural disaster. COVID, or economic slowdown etc.
because they are hot related to the implementation of GST,” a source said.
The GST Council has to decide how to meet the shortfall in such circum-
stances and not the Central Government, the sources added.
[Source : The Financial Express, New Delhi, dated 31-7-2020]

GST compensation : Some State FMs object to market bor-
rowing proposal, suggest steps to shore up revenue —
Move not feasible, say Punjab, Bihar, Kerala
As States oppose the proposal for them to borrow to bridge the revenue
gap under the Goods and Services Tax (GST) regime, some States have suggested
raising tax rates and bringing more items into the ambit of Compensation Cess to
shore up revenues.
Punjab Finance Minister Manpreet Singh Badal, in a letter to Union
Finance Minister Nirmala Sitharaman on 31-7-2020, took strong objection to re-
cent reports of the Central Government not having the money or the obligation
to pay GST compensation to States, stating that Centre had provided “innumera-
ble assurances” in the run-up to GST for “assured and unhindered compensa-
tion”.
Punjab is already operating with a GST deficit of over 45 per cent, Badal
said, adding the GST Compensation Act has been a Central legislation and the
obligation to pay compensation follows from the law’s enactment. He has sug-
gested five measures - ad valorem Compensation Cess to factor in inflation, sub-
suming Central Excise duty on cigarettes and tobacco products in Compensation
Cess, settlement of pending IGST dues, bringing back certain items into the 28
per cent tax slab and inclusion of services consumed by rich in the topmost 28
per cent slab - as possible solutions for reducing the revenue gap and hence the
burden of compensation to States.
“Any shortfall after these adjustments may be met through Central bor-
rowings. This will be both efficient in terms of the cost of borrowing as well as
equity. States should not be made to bear the burden of borrowing, which in any
case is likely to be higher than the rate at which the Central Government will be
able to borrow,” Badal said

GST LAW TIMES  6th August 2020  42
( A24 )