Govt asks States to avail borrowing options to meet GST shortfall for 2020-21
The Government has communicated to the States, the two borrowing options to meet the GST Compensation requirement for 2020-21 consequent to the discussions in the 41st meeting of the GST Council held on 27th August, 2020.
The States have been advised to communicate their preference within seven working days. A meeting of State Finance Secretaries with the Union Finance Secretary and Secretary (Expenditure) is scheduled to be held on 1st September, 2020 for clarifying issues, if any.
After the scheme is finalized, the states can chose either Option 1 or Option 2 and accordingly their compensation, borrowing , repayment etc will be dealt as per their individual choice. The options are applicable only for the shortfall occurring in the current financial year.
The Finance Ministry stated that due to Covid-19 pandemic, an act of GOD causing huge losses of revenue could not have been contemplated by the Parliament at the time of GST implementation.
It has been further stated that the Attorney General has clarified that the CGST Act does not require the Government of India to bear the liability of making good the shortfall and that it is the GST Council which has to decide on making good the shortfall.
The two options given to States are as under:
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