GST Council to discuss compensation cess today, opposition-ruled states may push for vote at meeting

The Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising of state finance ministers, will for the third time in a row discuss the issue of funding the shortfall of Goods and Services Tax (GST) revenue of states.

GST Council meeting today; Centre, states headed for another showdown on compensation cess
NEW DELHI: Opposition-ruled states are likely to press for a division of votes at the Goods and Services Tax (GST) Council meeting on Monday on the two options offered by the Centre on the compensation shortfall, if their demands are ignored.

About 10 states want a group of ministers (GoM) to review the proposals or get the council to consider a third option that involves the Centre and states sharing the burden of the borrowing proposed to bridge the deficit.

As many as 21 states — Tamil Nadu and those ruled by BJP — back borrowing Rs 1.1 lakh crore, the first option. They want it to be adopted so they can quickly access funds. The numbers favour them in the event of a vote.


“Kerala would press for a vote,” said state finance minister Thomas Isaac. He said the state also wants the Centre to remove conditions attached to the additional 0.5% borrowing under the Aatmanirbhar Bharat package if there is any delay in the decision on compensation. This will help them raise funds while a decision on the compensation cess fund deficit is worked out.

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“The GoM can be set up to settle issues raised by states. The council should decide within the legal framework and build consensus,” said TS Singh Deo, commercial tax minister, Chhattisgarh.
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Government officials said the council cannot have a vote as it does not have a mandate to decide such a matter but opposition-ruled states question this. “If the council does not have the mandate to vote on the borrowing issue, why did the Centre place it before the body and list it as one of the agenda items?” said Amit Mitra, finance minister, West Bengal. “There has been so much deliberation on the issue within the council.” He also said there is no clarity on what the special mechanism is and how it will work.

Deo said additional revenue-raising measures suggested by some states, including raising cess on gutkha, should be considered to meet the shortfall. Deo said, “Our view is clear; states cannot be burdened with the entire borrowing.”
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