‘Act of God’ Coronavirus Pandemic May Lead to Economic Contraction This Fiscal, Says FM Sitharaman

New Delhi: The Centre on Thursday set before the GST Council two choices for borrowing by states to meet the setback in GST revenues, pegged at Rs 2.35 lakh crore in the current financial.

Briefing reporters after the 41st gathering of the GST Council, Finance Minister Nirmala Sitharaman said the economy is confronting a remarkable “Act of God” situation that may bring about a economic compression. 

According to the Centre’s figuring, the pay prerequisite by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is required to be met from the cess imposed in the GST system. Hence, the total deficiency is assessed at Rs 2.35 lakh crore. 

Income Secretary Ajay Bhushan Pandey said that of this gauge, Rs 97,000 crore is by virtue of GST shortage, while the rest is because of the effect of coronavirus. 

Pandey said a unique window can be given to the states, in counsel with the RBI, at a sensible loan cost for acquiring of Rs 97,000 crore. The sum can be reimbursed following five years (of GST execution) finishing 2022 from cess assortment. 

The second choice before the states is to borrow the whole Rs 2.35 lakh crore setback under the extraordinary window.  

“During April-July 2020, the absolute GST remuneration to be paid to states is Rs 1.5 lakh crore, this is so on the grounds that there was not really any GST Collection in April and May. States have been given seven days’ an ideal opportunity to thoroughly consider the proposition,” Pandey said. 

The 41st gathering of the Goods and Services Tax (GST) Council headed by Union Finance Minister Nirmala Sitharaman and including agents all things considered, held consultations by means of video conferencing on approaches to compensate for the setback in states’ incomes. 

While congress and the states controlled by non-NDA parties pushed for the Centre gathering its legal commitment of covering the deficiency, the Union government refered to a legal opinion to state it had no such commitment if there was a shortage in tax collections.

The Centre just as BJP-JD(U)- ruled Bihar were of the opinion that the states ought to get to compensate for the deficit in the tax revenues that have been compounded by the COVID-19 crisis.