The Goods and Services Tax Council is meeting for its first meeting in nearly seven months today with the topic of the GST compensation period expected to dominate discussions.
Finance Minister Nirmala Sitharaman is chairing the 43rd meeting of the council through a video conference. She will address the media about the decisions taken at the meeting at around 7 p.m.
Some states are likely to demand the central government to guarantee GST revenue to them beyond 2022, when the compensation period comes to an end. The states, governed by parties other than the ruling Bharatiya Janata Party, intend to come together to argue that the period of GST compensation needs to be extended.
The GST Constitutional amendment had assured states of compensation for loss of revenue for five years (2017-2022), as state levies were subsumed under the common national tax. A subsequent law mandated a 14% compounded growth in states’ GST revenue every year till 2022. A cess was imposed on sin goods to fund this revenue assurance.
The finance ministers of West Bengal, Jharkhand, Punjab, Kerala, Rajasthan, Tamil Nadu and Chhattisgarh met on Wednesday and deliberated on issues such as extension of the compensation period among others ahead of the upcoming meeting.
An extension in the compensation period for states would require a constitutional amendment. Currently the revenue assurance in the Indian Constitution doesn’t prescribe the funding route—it makes no mention of how the assured revenue is to be funded, whether by the Consolidated Fund of India or through a cess or any other mechanism.