New Delhi | Jagran Business Desk: Two days after the holding the 41st GST Council meet, the Centre on Saturday said that it will clear the states' goods and services tax (GST) arrears despite the ongoing coronavirus pandemic, reported NDTV. 

In a letter to the states, the Centre said that it will support the extension of the compensation cess to discharge any arrears adding that the states are "entitled to compensation as per the method provided in Section 7 of the GST (Compensation to States) Act 2017 for the transition period".

"The prevailing economic situation is such that central revenues are under greater strain than GST revenue. Direct taxes on wages and salaries are also seriously affected. Customs revenues are also hit by the slowdown in imports. Central expenditures are stretched not only by the pandemic response but also by the needs of national security. This is a national problem, not a central government problem alone," the Centre said in its letter, as reported by NDTV.

"This year the Indian economy, nay the global economy, is suffering from an exogenous shock, namely the COVID-19 pandemic, whose scope and scale is unprecedented in history. Parliament obviously could not have contemplated a historically unprecedented situation of huge losses of revenue from the base - arising from an act of God quite independently of GST implementation - affecting both central and state revenues, direct and indirect," it added. 

The Centre on Thursday had held the 41st GST Council meet and informed that the estimated deficit of Rs 2.35 lakh crore this fiscal year can be made good by borrowing from the market against future tax revenues. 

After conducting a five-hour-long meeting, Finance Minister Nirmala Sitharaman described coronavirus pandemic as "act of God" and said that the state can borrow about Rs 97,000 crore -- the deficit arising out of GST implementation -- or the entire Rs 2.35 lakh crore.

"Once the arrangement is agreed upon by GST Council, we can proceed fast and clear these dues and also take care of the rest of the financial year. These options will be available only for this year; in April 2021, the Council will review and decide action for 5th year," news agency ANI quoted Sitharaman as saying.

Sitharaman further said that said the GST Council decided that the borrowing arrangement would be for the current fiscal and a review would be done at the beginning of the next financial year. A detailed note on the two options would be shared with the states and they would give their views on it in seven working days, she said.

She also said that as soon as an arrangement is agreed upon by the GST Council, the Centre will clear the pending bi-monthly compensation. The compensation amount due for the April-July period stands at Rs 1.50 lakh crore.

"This year we are facing an extraordinary situation... we are facing an act of God which might even result in a contraction of the economy, to what per cent I am not getting into that," Sitharaman said.

"Therefore, we said that portion (of compensation) which strictly is hardwired in the (GST) Act, we will arrange, give it to you...," she added.

(With agency inputs)

Posted By: Aalok Sensharma