The Centre will disburse a compensation cess amounting to Rs 20,000 crores, which is due to state governments for this year, on Monday night. It will provide immediate respite to the states hit by a cash crunch.
The GST council presided over by Finance Minister Nirmala Sitharaman, however, failed to reach a consensus on the mode of repayment of total compensation -- around Rs 97,000 crore – as the panel was split on political lines over using borrowing as a tool.
The council will again meet on Oct 12 to further deliberate on compensating states for GST cess shortfall.
The panel has also decided to extend using GST cess collections to compensate states beyond the previously agreed June 2022 timeframe. The surcharge on luxury products, which is part of the GST, had been due to expire in 2022.
Another big announcement is that companies with turnover less than Rs 5 crore are not required to file monthly return any more. They can file quarterly returns.
"From the first of January onwards, the taxpayers whose annual turnover is less than Rs 5 crores will not be required to file monthly returns -- that is, GSTR 3B and GSTR1. They will only file quarterly returns," Finance Secretary Ajay Bhushan Pandey said.
"The GST Council's decision to make returns obligatory for small taxpayers on a quarterly basis rather than monthly will be a major relief," he said.
On the issue of pending compensation to the states, Sitharaman said that when the GST law was formulated it did not factor in a Covid-19 like pandemic into account. "We have not denied compensation to the states," she insisted.
"No one will be denied compensation, borrowing will have to be resorted to. States need to decide how and when. The Centre is not sitting on funds," Sitharaman told media after the GST Council meeting.
*Compensation cess amounting to Rs 20,000 crores, for this year, being distributed immediately
*Companies with less than Rs 5 crore turnover not required to file monthly but quarterly returns
*States will be compensated from GST cess beyond June 2022 timeframe
*No consensus on mode of repayment of total compensation -- around Rs 97,000 crore. Another meeting on Oct 12.