Goods and Services Tax – GST Dated:- 21-9-2020 – News – As per provision in Sections 7 , 8 10 of the GST (Compensation to States) Act, 2017 , the issue of pending GST compensation and future course of action to meet the GST compensation shortfall has been discussed in 41 st GST Council meeting on 27.08.2020 in the light of the opinion given by Ld. Attorney General of India, wherein States were given two options to meet their GST compensation shortfall for current FY from market borrowing. This was stated by Shri Anurag Singh Thakur, Union Minister of State for Finance Corporate Affairs in a written reply to a question in Rajya Sabha today. However, some States/UTs have suggested Central Government to borrow money from market and compensate States to meet GST revenue shortfall. In this regard, it is submitted that Central Government continues to remain engaged with the States who have not given either of the options, the Minister stated. Shri Thakur said that the d
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ding National Capital Territory), suitable arrangements to ensure flow of resources under the Special Window to them would be made by the Government of India The interest on the borrowing under the Special Window will be paid from the Cess as and when it arises until the end of the transition period. After the transition period, principal and interest will also be paid from proceeds of the Cess, by extending the Cess beyond the transition period for such period as may be required. The State will not be required to service the debt or to repay it from any other source. States will also be given permission to borrow the final instalment of 0.5% (originally intended as a bonus for completing at least three of the four specified reforms) allowed in para 4 of the Department of Expenditure s OM F.No. 40(06)/PF-S/2017-18 dated 17-5-20 (hereinafter referred to as DOE OM) even without meeting the pre-conditions. This will enable borrowing of approximately ₹ 1 lakh crores in aggreg
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on Cess each year would be the interest payable; the second charge would be the principal repayment. The remaining arrears of compensation accrued during the transition period would be paid after the interest and principal are paid. Option 2 The entire shortfall of ₹ 235,000 crores (including the Covid-impact portion) may be borrowed by States through issue of market debt. The GOI will issue an OM committing to repayment of principal on such debt from Cess proceeds as per para IV below. Appropriate enhanced special borrowing permission will be given by the GOI under Article 293 based on the following methodology, in modification of scheme notified earlier under the DOE OM: a. Each state s borrowing limits for the year will be based on the following calculation: Basic eligibility (3 % of GSDP) + Amount allowed for shortfall as per Item I above of Option 2+ up to 1% of GSDP (reform-linked as per paras 5 to 8 of DOE OM)
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97,000 crores approximately in aggregate) the borrowing will not be treated as debt of the State for any norms which may be prescribed by the Finance Commission etc. The Compensation Cess will be continued after the transition period until such time as all arrears of compensation for the transition period are paid to the states. The first charge on the future Cess would be the principal repayment. The remaining arrears of compensation accrued during the transition period would be paid after the principal is paid. The Minister also stated that it was also decided that States will give their preference and views thereon. Thereafter on finalisation of scheme, the states can choose either Option 1 or Option 2 and accordingly their compensation, borrowing, repayment etc will be dealt as per their individual choice. Abstract of the opinion of the Ld. Attorney General is as per Annexure . Click on the following link: Annexure – News – Press release – PIB Tax Managem
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