Highlights of 41st GST Council Meeting
The focus area of the 41st GST Council Meeting, held on 27th August 2020, was the only shortfall of GST compensation and ways to compensate the states for the revenue shortfalls. Noticeably, the 41st GST Council Meeting was conducted via video conferencing under the Chairmanship of the Finance Minister, Shrimati Nirmala Sitharaman. The current article summarizes the key highlights of the GST Council Meeting.Options made available to states to meet the shortfalls
The figurative working says that the total shortfall for the Financial Year 2020-2021 works out to be INR 2,35,000 Crores. Out of the said total shortfall of INR 2,35,000, only INR 97,000 Crore relates to a shortfall on account of GST implementation. The remaining shortfall is marked as a shortfall on account of COVID-19 pandemic. In order to meet the shortfall, the states are given two options. The two options so available with the states are explained hereunder- OPTION 1 – State borrowings via Centre facilitation-- Under this option, the Centre can facilitate the shortfall occurred only on account of GST implementation i.e. INR 97,000 Crore,
- The borrowings will be possible through a special window by the Reserve Bank of India (RBI),
- The borrowings can be repaid after 5 years on the collection of the cess, and
- A reasonable rate of interest will be payable on such borrowings.
Certain clarifications
While addressing the press, certain clarifications were given. The said essential clarifications are-- The Government will provide further 0.5% relaxation in the state borrowings limit under the FRBM Act. The relaxation will facilitate the states to borrow more funds.
- The above arrangement will remain valid only for the Financial Year 2020-2021. For the period from April 2021, the situation will be further re-assessed and decide accordingly.
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