The advent of coronavirus pandemic and midst the chorus for GST compensation from states, the government has told that there is a need to factor at the time of unusual situation, which is described as an “act of God” intending that there was no chance of 14 percent rise in Goods and Services Tax collections at the time of crisis.
If the collection growth of GST was under 14 percent in a year, the Centre had promised to compensate states for “revenue loss” while launching GST three years ago. An official said “ compensating is a bigger problem. The center is not going back on its words, but should it not enforce the force majeure clauses since this is an event triggered by things beyond anyone’s control? It is an ‘act of God’.”
On Friday, many states’ finance minister had blocked a move to increase GST on garments and footwear as part of the proposal to correct to inverted duty structure where the finished product has lower levis than inputs because this was “not the right time” when businesses want stimulus. At the GST Council meeting on Friday, data showed that GST collections had jumped to over Rs 62,000 crore in May that is around twice the level observed in April, but 38 percent lower than the last year. As the center is not imposing the payment and filing deadline, after a few months only the actual numbers will be known.
After finance minister Nirmala Sitharaman recommended in March that the Council could look at the option of market borrowings, the center has agreed to look into the issue of compensating states. In Goa during the GST Council meeting, the issue had been raised as the average Gross Domestic Product (GDP) growth had turned down from the earlier highs. “To reach 14 percent GST growth, with GDP growth of 6 percent is tougher than 8 to 9 percent, “ a state revenue secretary said. At Friday’s meeting, the GST Council secretariat sought to push for discussion on the inverted duty structure for fertilizers, footwear, fabric, pharma products, tractors, and renewable energy only to be rejected by the states.
