In the recent GoM council meeting on June 29, there was no discussion about extending GST compensation for states. This was clarified by finance minister Nirmala Sitharaman during the meeting.
The 47th GST council meeting was held in Chandigarh on June 29 and June 30, Tuesday and Wednesday. The meeting was attended by finance minister Nirmala Sitharaman along with finance ministers of states and union territories of the country. The two-day conference discussed the various terms and policies with regard to Goods and Services Tax (GST). The topic of discussion included increasing tax rates for some goods, categorizing new sectors and defining tax rates for them as well as the application of new rates.
While there were discussions on new tax rates, the extension for GST compensation for states was not discussed. Finance Ministers of many states had requested an extension. K Laxminarayanan, finance minister for Puducherry has stated in the meeting the need for an extension of compensation for states but no decision has been taken. The decision regarding this is expected to be taken in the next council meeting on August 1.
When the GST was brought into application in 2017, the council had promised compensation for any loss of revenue to states for five years. Out of these five years two years the country was under pandemic. This term of five years is supposed to end in July 2022. The states have requested to extend this period as two years were under pandemic which has had an impact on the revenue through taxes. In addition to this, the state extended compensation on luxury and demerit goods till March 2026. This extension includes repaying borrowings done in 2020-21 and 2021-22. This results in a loss of revenue for states in the short term.
The meeting also deferred the discussion on the separate tax treatment for revenue earned through online gaming. Earlier this was considered gambling but now will be treated separately with tax levied at 28 percent. The council has also raised tax rates for a few commodities which will be applicable from 1 July 2022. The meeting did not discuss anything about cryptocurrencies, tax on petroleum goods and state compensation. These agendas are expected to be discussed in the next council n=meet which is scheduled on 1 August 2022 in Madhurai.
