Page 43 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] NEWS DESK J25
Kerala Finance Minister Thomas Isaac said, “AG opinion seems to be
that if there is no money in cess fund it’s upto GST Council to make appropriate
arrangements. Fine. But the Centre has 1/3rd votes in Council. No decision can
be taken without its concurrence. So the question is, what is its stance? To pay or
not to pay?”
Bihar Deputy Chief Minister Sushil Kumar Modi also concurred with the
view that borrowing by States or the Centre, if to be repaid from the Compensa-
tion Cess fund, is not feasible. Instead the Centre must consider raising the long
pending demand of raising the fiscal deficit limit for States to allow them to bor-
row more. “States have already been demanding raising the fiscal deficit limit
unconditionally from 3.5 per cent to 4 per cent (of GSDP). States should be al-
lowed to borrow more, which is not to be paid through the Compensation Cess
fund. And even if that condition is put nobody will give you that loan because
there won’t be much money in that kitty (Compensation Cess fund). So, if there
are not enough Cess collections, then ultimately you have to pay from the consol-
idated fund (of States),” he said.
Modi said the only solution is to raise GST rates. “Not only States but the
Centre is also getting less revenue and I don’t think it is feasible for the Centre to
borrow and compensate States. It is not a one-time affair, it is going to continue
for another 1 year or 2 years or more. So the only other option left is to increase
the tax rates, which will have to be decided by the GST Council Pandemic will
continue for a much longer time, so ultimately you will have to decide after 1
month, 2 months or 3 months, whether it is inverted duty structure or tax rates,
so that there is less revenue loss,” he said.
[Source : The Indian Express, New Delhi, dated 1-8-2020]

Call GST Council Meet
Problem of States’ dues needs co-operative settlement
Union Finance Secretary Ajay Bhushan Pandey has reportedly told the
Parliamentary Standing Committee on Finance that the Union Government is in
“no position” to pay the State Governments their agreed upon share of revenue
from Goods and Services Tax (GST). GST was introduced on the undertaking
that States would be compensated for lost revenue, if any, by the Union. This
undertaking embedded the assumption that revenue would grow 14 per cent
year-on-year. The influence of the pandemic and the associated lockdown on
overall Government revenue has, however, led the Union Finance Ministry to
reassess its position. The question of denying States their share will no doubt be
raised. Mr. Pandey’s position is that the GST Act permits a reworking of the for-
mula by which compensation is paid to the States if revenue collection falls too
far. On 27-7-2020, the Finance Ministry said the final instalment of the past year’s
GST compensation had been released to the States, totalling almost ` 14,000
crore, taking the amount released for the year to ` 1.65 trillion, over ` 70,000
crore more than the amount collected as Compensation Cess. The Government
was able to do this partly by dipping into what it had held on to from the com-
pensation from the previous two years. That, of course, is no longer a possibility.
The Union Government also had recourse to the Integrated GST cash it had on
hand - which in any case was due to be allocated to States.

GST LAW TIMES  6th August 2020  43