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GST Council Meeting

The 41st meeting of the GST (Goods and Service Tax) council was held on Thursday (27th August 2020) under the chairmanship of union finance minister Nirmala Sitaraman and other representatives of all states. This meeting had a single point agenda and was conducted virtually through video conferencing. The meeting involved the agenda on various ways to compensate the States for the shortfall in GST revenue distributions.

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GST Council Meeting

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  1. 41st GST Council Meeting The 41st meeting of GST (Goods and Service Tax) council was held on Thursday (27th August 2020) under the chairmanship of union finance minister Nirmala Sitaraman and other representatives of all states. This meeting had a single point agenda and was conducted virtually through video conferencing. The meeting involved the agenda on various ways to compensate the States for the shortfall in GST revenue distributions. In financial year 2020-21 the shortfall in GST stands at Rs 2.35 lakh crore out of which the due amount was Rs 97,000 crore due to the implementation of GST while the rest is considered as due to COVID 19 which is an act of God. While the meeting was being conducted the State had various expectations from the Union which includes whether compensation will be provided to states or not, or will there be any revision on the rates of GST, will there be any GST rate cut for the two wheeler industry and so on. KEY HIGHLIGHTS OF 41ST GST COUNCIL MEETING:- The states were provided with two options in order to meet the shortfall. 1.The states can borrow Rs 97,000 crore from the Centre through a special window by RBI. This can be repaid to the Centre after 5 years on the collection of compensation cess by paying a reasonable rate of interest. 2.The states can borrow Rs 2,35,000 crore which is the entire GST compensation from the RBI directly. It was also mentioned during the meeting that the States shall evaluate both the options within seven working days in order to finalize the choices when the GST council will meet again.

  2. As the media was being addressed during the meeting the Finance Minister Nirmala Sitaraman says and I quote, “We are facing an extraordinary situation this year due to COVID. This is an act of God which might even result in the contraction of the economy.” She further added, “ The compensation Act did not foresee an act of God”. States will also be given a further relaxation in FRBM of 0.5% points for market borrowing, says FM. The options which were being provided to the states during the meeting will remain valid only for the FY 2020-21. Thus, the council will reexamine the complete situation in the upcoming April 2021. It was also stated that the States can borrow money from Centre under the RBI guidelines with the G-security linked interest rates without any problem. When asked about GST cut for two- wheelers, the council mentioned two-wheelers may merit togo to the GST council for a consideration but it is neither a luxury nor a sin goods. Further, the Attorney General is of the view that the shortfall in GST collections cannot be met from Consolidated Fund of India. Hence, it can be said that the Council will most likely go for market borrowings.

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