Faced with a sharp decline in GST collections due lockdown and disruptions in economic activities across the country, the Centre is looking at paying GST compensation to states using a portion of its borrowings and repaying it by collecting cess in the sixth or further subsequent years.
New Delhi:
Under the GST law, states are guaranteed full compensation for any revenue loss for the first five years after the introduction of the uniform tax in July 2017.
“This (extending the duration of GST compensation cess) has been discussed in the past to ensure states are paid full compensation for any loss of revenue in first five years of the implementation of the new indirect tax regime while the Centre repays its liabilities through cess collections in subsequent years. The GST Council may explore the option again at its next meeting,” government sources said.