Union government says it will honour entire GST compensation owed to states

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Recently, the Union government said that the Goods and Service Tax (GST) compensation which are owed to the states due to the inadequacy in collecting GST, will be “honoured” to the states. 

The GST council (constitutional body, that takes decisions pertaining to GST) mentioned that while a part of it, that is, 97,000 crore rupees, will be paid immediately, the balance over the delayed period will be decided mutually by the GST council. 

The clarification made by the union government comes ahead of the GST council meeting that is scheduled on 19 September. A senior government official told Mint, that hundred percent will be paid to the state governments, thus making it explicit that the states will get their dues. The official also added that the union government had also summoned a meeting of the finance secretaries of states so that the position is clarified. In the last meeting with the states, which lasted for three hours, the government elaborated the options which were shared with the states. Further, the person added that the government prefers if the states lend to fund the payout. 

The Union government has also started conversation with the Reserve Bank of India, to open a special window from where the states can access loans at a similar rate. The borrowings done by the states will be settled by amount received from cess (Cess can be defined as an additional form of tax, that is imposed to raise revenue for specific purposes) so that the state government budgets are not pressurized.

The clarifications have been done by the Union government after significant differences in the last GST meeting between the centre and the states. The GST council ended up having different opinions and the opposition raised objections.

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