A special session of the GST Council will be held soon to consider extending the five-year GST shortfall compensation period to states beyond July 2022, Revenue Secretary Tarun Bajaj said on Friday.
The 43rd Goods and Services Tax (GST) Council meeting held on May 28 was chaired by Finance Minister Nirmala Sitharaman and sources told CNBC-TV18 that the top decision-making body, which met after seven months has decided that the Centre will borrow Rs 1.58 lakh crore and pass it on to the states as back-to-back loans to make up for the shortfall in their revenues from the implementation of the GST.
Finance Minister Nirmala Sitharaman had said on Friday, "I have assured the members there will be a special session only on the compensation cess issue beyond July 2022." Borrowing for the compensation in the current fiscal to be given back to back loans to states, she added.
Bajaj said that Rs 35,000 crore out of this amount may be used to pay the last fiscal compensation arrears to the states.
The Reserve Bank of India, Department of Economic Affairs, and the Expenditure Department will work out the timing and the tranches of borrowing, Bajaj said.
The annual compensation gap might rise to Rs 1.58 lakh crore if the GST mop-up hits Rs 1.1 lakh crore.
The compensation gap is the difference between the compensation required to be paid to states to make good any shortfall in GST revenue collections and the cess money transferred to them.
If the GST mop-up hits 1.15 lakh crore, the annual compensation gap is estimated to be Rs 1.25 lakh.