May not be able to pay GST dues: Centre | Economic Times

NEW DELHI: The Centre is said to have told a parliamentary panel it may not be able to pay goods and services tax (GST) compensation due to states in the near future as tax collections have fallen due to the economic slump on account of the Covid-19 pandemic and the subsequent lockdown.The issue of GST compensation was raised by Opposition members of the standing committee on finance that met on Tuesday to deliberate on 'Financing the innovation ecosystem and India's growth companies'. The Opposition members also sought a discussion on the state of the economy.Finance secretary Ajay Bhushan Pandey and Department for Promotion of Industry and Internal Trade (DPIIT) secretary Guruprasad Mohapatra were among officials who appeared before the committee. They said the government is not in a position to clear all GST compensation dues in the near future as the economy is not robust enough to bear the cost, said people with knowledge of the matter. GST collections are likely to fall significantly as consumption has slumped due to the pandemic, the officials were cited as having said.In the first three months of the current financial year, the government collected Rs 1.85 lakh crore as GST, down from Rs 3.14 lakh crore in the year-earlier period. The compensation amount is supposed to be paid to states in bimonthly instalments.No timeline for clearing duesThe government had promised states it would make good any loss in revenue based on a pre-agreed formula for five years to get them to support GST, which was rolled out in July 2017. The steep fall in GST will raise the compensation amount.When asked if the government was trying to go back on its commitment to the states, the officials maintained that there are provisions in the legislation that allow the Centre to defer compensation payments to states when GST collections fall short, said the people cited earlier.The officials did not give any timeline for clearing the dues.The Centre has released Rs 1.65 lakh crore as GST compensation to states and union territories for FY20 against a cess collection of Rs 95,444 crore, the finance ministry said in a statement on Monday. For March 2020, the Centre released GST compensation of Rs 13,806 crore, thus clearing all dues to states for FY20, the statement said.The Centre has already expressed its inability to pay GST compensation to states in the GST Council and suggested market borrowings by the council to discharge this liability. The law ministry is examining the proposal that is likely to be taken up at the council's next meeting.Discussion on economyThe Opposition members demanded a structured discussion on the impact of the pandemic and the lockdown on the economy at the next meeting of the committee. Members emphasised that GDP projections in the Budget and plans envisaged in March do not hold now.Congress leader Manish Tewari had written to committee chairperson Jayant Sinha on July 16 raising the plight of 50 million inter-state migrants, expectations of negative growth and retrenchment across various sectors. He had said these issues should be discussed at the panel's July 28 meeting.In the two-hour meeting on Tuesday, Mohapatra and other officials spoke on the status of startups in the country, the flow of capital, including foreign direct investment (FDI), into these ventures, tax incentives provided by the government and related issues.