Quick Summary
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 41stGST Council meeting on 27.08.2020 in the light of the opinion given by Ld. Attorney
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FAQ :
The main issue is the pending GST compensation and how to meet the GST revenue shortfall for states.
Two borrowing options have been presented to the states to meet their GST compensation shortfall.
Under Option 1, states borrow money through a special window coordinated by the Ministry of Finance. The interest is paid from the Cess until the end of the transition period, and both principal and interest will be paid from Cess proceeds thereafter, extending the Cess beyond the transition period if necessary. States will not need to repay from other sources.
The shortfall arising out of GST implementation is calculated at approximately Rs. 97,000 crores for Option 1.
Under Option 2, states borrow the entire shortfall of Rs 235,000 crores through market debt. The Government of India commits to repaying the principal from Cess proceeds.
For the shortfall arising due to GST implementation (approximately Rs. 97,000 crores), the borrowing will not be treated as debt of the state for any norms prescribed by the Finance Commission etc.
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