Decision on GST compensation beyond 2022 unlikely at today’s meet

 







The central government is sympathetic to states’ fiscal woes but a decision on extending the Goods and Services Tax (GST) compensation beyond 2022 is unlikely soon given the fiscal constraints, several people said.


At Friday’s GST Council meeting in Lucknow, states and the central government will review their revenue position as well as demands from states for GST compensation beyond 2022 but there is no clarity on how this will be financed.

We are sympathetic to states’ fiscal concerns and are exploring ways to augment their revenue by administrative means including by correcting tax anomalies so that thenala financial position of states improve. We will decide on GST compensation as things pan out," said a person privy to the Centre’s views on the subject without committing anything on extension of GST compensation for an extended period.

Kerala finance minister K.N. Balagopal told Mint that several state governments have sought a full five-year extension of GST compensation beyond 2022.

“We are seeking continuation of GST compensation in its present form for another five years. We are looking forward to a positive outcome," said Balagopal.

A state government official, who is privy to Centre-state discussions and spoke on condition of anonymity, said that a decision on extending GST compensation beyond 2022 was unlikely on Friday.

“The Constitutional and legal requirement for compensating states for GST revenue shortfall for five years ends in 2022. The GST cess is already committed for several years beyond 2022 (to finance the debt raised to pay part of the GST compensation requirement in FY21 and FY22). To finance GST compensation beyond 2022, there has to be a source of revenue and there is no clarity on that," explained the official. The focus would be on augmenting revenue collections to improve state finances, the person said.

Extending GST compensation in its current form means states’ protected revenue for computing the compensation amount goes up by 14% annually from the FY16 base year. Any gap between this protected revenue and what is actually collected by the states has to be compensated by the Centre. Finding resources for this would be a big task.

The Kerala FM also did not find any merit in bringing petrol and diesel within the ambit of GST at this juncture. “We prefer the taxation of petrol and diesel to continue in the present form," Balagopal said.

A Kerala high court order in June on a public interest litigation seeking inclusion of petrol and diesel in GST had given rise to expectations that the autofuels could be included in the new indirect tax regime. However, this could mean central and state governments sacrificing their revenue receipts from these products at a time both are facing fiscal pressures. Judicial pronouncements are placed before the Council but a change in taxation of petroleum products is unlikely soon.

The Council is expected to extend tax relief granted to certain covid-19 related medical supplies till December-end.

Download our App to get knowledge updates: https://play.google.com/store/apps/details?id=com.app.gstmitra

Join Our Telegram Channel for more updates:https://t.me/praveengst







Comments

Post a Comment

Popular posts from this blog

Centre appeals against ruling on levy of GST on maintenance charges to resident welfare associations

Image
  The Centre has preferred a writ appeal before the Madras High Court against a single judge's order that flat or villa owners paying more than ₹7,500 a month towards maintenance charges to their residents’ welfare associations must pay Goods and Services Tax (GST) at the rate of 18% only for the amount exceeding ₹7,500 and not for the entire monthly contribution. Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup on Wednesday allowed an application filed by the Centre to dispense with production of a certified copy of the judgment passed by Justice Anita Sumanth recently and directed the Registry to list the appeal for admission in the usual course. Justice Sumanth had in July this year quashed an order passed by the Authority for Advance Ruling (AAR) on June 21, 2019 as well as a consequent circular issued by the Department of Revenue under the Union Finance Ministry on July 22, 2019 since both of them had insisted upon collecting GST for entire monthly contribution. The jud
Read more

Seven key things to know before filing income tax return (ITR) for FY21

Image
  The last date to file income tax return for the financial year 2020-21 has been extended to September 30, 2021. Although there is more than two months left for the deadline to end, it is always recommended to complete the task as soon as possible and not to wait for the last minute. Worth mentioning here is that the income tax department last month launched a new e-filing portal (www.incometax.gov.in) to speed up the processing of tax returns. The I-T department will soon launch a mobile application, having all the features of the new portal. This year taxpayers have to take care of the following changes in the ITR filing process. 1) A new utility named JSON has been launched for filing tax return forms for FY21. At present, only three forms, ITR 1, 2 and 4 have been released. These new forms will import pre-fill data such as personal details, salary income, dividend income, interest income, capital gains and all the information available in Form 26AS. 2) Taxpayers will have the opti
Read more

Income Tax Return or ITR for FY20 Can Be Filed Till May 31

Image
  n the wake of severe Covid-19 pandemic, the Central Board of Direct Taxes (CBDT) has decided to extend timelines of various tax compliance dates on Saturday. “In view of the adverse circumstances arising due to the severe Covid-19 pandemic and also in view of the several requests received from taxpayers, tax consultants & other stakeholders from across the country, requesting that various compliance dates may be relaxed, the Government has extended certain timelines today," the ministry of finance said in a statement. The move is aimed at mitigating “the difficulties being faced by various stakeholders," it further added. The “relaxations are the latest among the recent initiatives taken by the government to ease compliances to be made by the taxpayers with the aim to grant respite during these difficult times," it mentioned in a notification. “It’s a welcome move to extend the timeline of various tax compliances as the country is struggling with severe second wave
Read more