25-Nov-2022: Centre releases Rs. 17,000 crore of GST compensation to States/UTs

The Central Government released an amount of Rs. 17,000 crore to States/UTs on 24.11.2022 towards the balance GST compensation for the period April to June, 2022 (State-wise details as per Table below). The total amount of compensation released to the States/UTs so far, including the aforesaid amount, during the year 2022-23 is Rs.1,15,662 crore.

This is despite the fact that total Cess collection till October, 2022 is only Rs.72,147 crore and the balance of Rs. 43,515 crore is being released by the Centre from its own resources. With this release, the Centre has released, in advance, the entire amount of Cess estimated to be collected this year till March-end available for payment of compensation to States. This decision was taken to assist the States in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year.

Even in May this year, the Central Government had released Rs. 86,912 crore as provisional GST compensation to States for the period Feb-May’2022 despite the fact that there was only about Rs. 25,000 crore in the GST Compensation Fund, by making arrangement of funds of around Rs. 62,000 crore from its own resources.

14-Mar-2022: GST reduced from 18% to 5% for domestic Maintenance, Repair and Overhaul (MRO) services

The average number of the passenger carried in the pre-Covid financial year (2019-20) was around 4 lakh per day. On 6th March 2022, domestic airlines in India carried around 3.7 lakh passengers. The number of daily air passengers may cross pre-COVID levels in a few months.

The Government has taken several steps to meet the increasing demand in aviation sector in future, some of which include the following:

1. AAI has taken up development of new and existing airports with a projected capital expenditure of around Rs. 25,000 crores in next five years. This includes construction of new terminals, expansion and modification of existing terminals, expansion and/ or strengthening of existing runways, aprons, Airport Navigation Services (ANS) infrastructure, control towers and technical blocks etc.
2. The Public Private Partnership (PPP) airports at Delhi, Hyderabad and Bengaluru are undertaking major expansion projects of around Rs. 30,000 crores by 2025. Additionally, Rs. 36,000 crores have been planned for investment in the development of new Greenfield airports across the country under PPP mode.
3. Government of India has accorded 'in-principle' approval for setting up of 21 Greenfield Airports across the country. So far, eight Greenfield airports namely, Sindhudurg and Shirdi in Maharashtra, Durgapur in West Bengal, Pakyong in Sikkim, Kannur in Kerala, Orvakal in Andhra Pradesh, Kalaburagi in Karnataka and Kushinagar in Uttar Pradesh have been operationalized.
4. Under Regional Connectivity Scheme (RCS) - Ude Desh ka Aam Nagrik (UDAN), 403 routes connecting 65 airports (including 8 heliports and 2 water aerodromes) have been operationalised as on 31 January 2022.
5. Goods and Services Tax (GST) rate has been reduced from 18% to 5% for domestic Maintenance, Repair and Overhaul (MRO) services.
6. A conducive aircraft leasing and financing environment has been enabled.
7. Improvement in air navigation infrastructure at Indian airports is being carried out.

The issue of reduction of Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) has been taken up with the States and the UTs. The following 11 States/UTs have reduced the VAT on ATF to below 5%:

Andaman & Nicobar Islands, Dadar & Nagar Haveli and Daman & Diu, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir,  Ladakh, Madhya Pradesh, Tripura, Uttar Pradesh and Uttarakhand.

5-Nov-2020: Rajasthan decides to go for Option-1 to meet the GST implementation shortfall

The Government of Rajasthan has communicated its acceptance for Option-1 out of the two options suggested by the Ministry of Finance to meet the shortfall in revenue arising out of GST implementation.  The State has now joined 21 other States and 3 Union Territories (Delhi, Jammu & Kashmir and Puducherry) who have opted for Option-1.

The States who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Government of India. The window has been operationalised now and the Government of India already borrowed an amount of Rs.12,000 crores on behalf of the States in two instalments and has passed it on to 21 States and 3 Union Territories on 23rd October, 2020 and 2nd November, 2020.  Now the Government of Rajasthan will receive funds raised through this window.  The next instalment of borrowings is likely to be released on 9th November, 2020. 

Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, States are also entitled to get unconditional permission to borrow the final instalment of 0.50% of Gross State Domestic Product (GSDP) out of the 2% additional borrowings permitted by the Government of India, under Aatmanirbhar Abhiyaan on 17th May, 2020.  This is over and above the Special Window of Rs.1.1 lakh crores. On receipt of the choice of Option-1from the Government of Rajasthan, the Government of India has today granted the State Government of Rajasthan additional borrowing permission of Rs.5,462 crores (0.5% of Rajasthan’s GSDP).

States who have opted for Option-1 are – Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Tripura, Tamil Nadu, Uttar Pradesh, and Uttarakhand, along with the three Union Territories of Delhi, Jammu & Kashmir and Puducherry.

20-Sep-2020: Borrowing of money to meet GST revenue shortfall

As per provision in Sections 7, 8 & 10 of the GST (Compensation to States) Act, 2017, the issue of pending GST compensation and future course of action to meet the GST compensation shortfall has been discussed in 41st GST Council meeting on 27.08.2020 in the light of the opinion given by Ld. Attorney General of India, wherein States were given two options to meet their GST compensation shortfall for current FY from market borrowing. This was stated by Shri Anurag Singh Thakur, Union Minister of State for Finance & Corporate Affairs in a written reply to a question in Rajya Sabha today.

However, some States/UTs have suggested Central Government to borrow money from market and compensate States to meet GST revenue shortfall. In this regard, it is submitted that Central Government continues to remain engaged with the States who have not given either of the options, the Minister stated.

Shri Thakur said that the details of the two borrowings options were communicated to the States by the Department of Expenditure as under: -

Option 1:

1. The shortfall arising out of GST implementation (calculated at Rs. 97,000 crores approximately) will be borrowed by States through issue of debt under a Special Window coordinated by the Ministry of Finance.
2. It will be the endeavour to ensure steady flow of resources similar to the flow under GST compensation on a bi-monthly basis.
3. The GOI will endeavour to keep the cost at or close to the G-sec yield, and in the event of the cost being higher, will bear the margin between G-secs and average of State Development Loan yields up to 0.5% (50 basis points) through a subsidy.
4. A special borrowing permission will be given by the GOI under Article 293 for this amount, over and above any other borrowing ceilings eligible under any other normal or special permission notified by Department of Expenditure.
5. In respect of Union Territories (including National Capital Territory), suitable arrangements to ensure flow of resources under the Special Window to them would be made by the Government of India
6. The interest on the borrowing under the Special Window will be paid from the Cess as and when it arises until the end of the transition period. After the transition period, principal and interest will also be paid from proceeds of the Cess, by extending the Cess beyond the transition period for such period as may be required. The State will not be required to service the debt or to repay it from any other source.
7. States will also be given permission to borrow the final instalment of 0.5% (originally intended as a bonus for completing at least three of the four specified reforms) allowed in para 4 of the Department of Expenditure’s OM F.No. 40(06)/PF-S/2017-18 dated 17-5-20 (hereinafter referred to as DOE OM) even without meeting the pre-conditions. This will enable borrowing of approximately Rs. 1 lakh crores in aggregate.
8. The first instalment of 0.5% unconditional borrowing permission granted vide para 4 of the DOE OM remains unaffected. The reform-linked tranches specified in paras 5 to 8 of that OM also remain unaffected.
9. In modification of para 9 of the DOE OM, States will be able to carry forward unutilised extra borrowing ceilings given under that OM to the next financial year; the instalments under para 4 (0.5 unconditional + another 0.5 as per para VII above) can be carried forward unconditionally; the reform-linked portions can be carried forward if the States meet the reform criteria within the dates already prescribed for this year.
10. The borrowing under the Special Window will not be treated as debt of the State for any norms which may be prescribed by the Finance Commission etc.
11. The Compensation Cess will be continued after the transition period until such time as all arrears of compensation for the transition period are paid to the States. The first charge on the Compensation Cess each year would be the interest payable; the second charge would be the principal repayment. The remaining arrears of compensation accrued during the transition period would be paid after the interest and principal are paid.

Option 2:

1. The entire shortfall of Rs 235,000 crores (including the Covid-impact portion) may be borrowed by States through issue of market debt. The GOI will issue an OM committing to repayment of principal on such debt from Cess proceeds as per para IV below.
2. Appropriate enhanced special borrowing permission will be given by the GOI under Article 293 based on the following methodology, in modification of scheme notified earlier under the DOE OM:
   1. Each state’s borrowing limits for the year will be based on the following calculation: Basic eligibility (3 % of GSDP) + Amount allowed for shortfall as per Item I above of Option 2+ up to 1% of GSDP (reform-linked as per paras 5 to 8 of DOE OM) OR Basic eligibility (3% of GSDP) + 1% of GSDP + up to 1% of GSDP (reform linked as per paras 5 to 8 of DOE OM) whichever is higher.
   2. The additional unconditional borrowing limit of 0.5% and the final (bonus) tranche of 0.5% under para 4 of the DOE OM will not be separately available, being subsumed under the calculation above.
   3. States will remain eligible for the reform-linked tranches of borrowing under paras 5 to 8 of the DOE OM this year but shall not be eligible to carry them forward. The maximum amount which can be availed under that OM shall stand reduced to 1% of GSDP instead of 2% of GSDP.
3. The interest shall be paid by the States from their resources.
4. The principal on the amount under Item I above will, after the transition period, be paid from proceeds of the Cess. The States will not be required to repay the principal from any other source.
5. To the extent of the shortfall arising due to implementation of GST (i.e. Rs. 97,000 crores approximately in aggregate) the borrowing will not be treated as debt of the State for any norms which may be prescribed by the Finance Commission etc.
6. The Compensation Cess will be continued after the transition period until such time as all arrears of compensation for the transition period are paid to the states. The first charge on the future Cess would be the principal repayment. The remaining arrears of compensation accrued during the transition period would be paid after the principal is paid.

The Minister also stated that it was also decided that States will give their preference and views thereon. Thereafter on finalisation of scheme, the states can choose either Option 1 or Option 2 and accordingly their compensation, borrowing, repayment etc. will be dealt as per their individual choice.

29-Aug-2020: Borrowing options to meet the GST Compensation requirement for 2020-21

The two borrowing options to meet the GST Compensation requirement for 2020-21 consequent to the discussions in the 41stmeeting of the GST Council held on 27th August, 2020 has been communicated to States, as per the document attached with this press note, to communicate their preference within seven working days. A meeting of State Finance Secretaries with the Union Finance Secretary and Secretary (Expenditure) is scheduled to be held on 1st September, 2020 for clarifying issues, if any.

8-Jun-2020: Government rolls out facility of filing of NIL GST Return through SMS

In a significant move towards  taxpayer facilitation, the Government has today onwards allowed filing of NIL GST monthly return in FORM GSTR-3B through SMS. This would substantially improve ease of GST compliance for over 22 lakh registered taxpayers who had to otherwise log into their account on the common portal and then file their returns every month. Now, these taxpayers with NIL liability need not log on to the GST Portal and may file their NIL returns through a SMS.

For this purpose, the functionality of filing Nil FORM GSTR-3B through SMS has been made available on the GSTN portal with immediate effect. The status of the returns so filed can be tracked on the GST Portal by logging in to GSTIN account and navigating to Services>Returns>Track Return Status. The procedure to file Nil returns by SMS is as follows: -

16-Jan-2017: Centre, states agree on GST, rollout likely from July 1

In a significant breakthrough in implementation of India’s biggest tax reform, the deadlock over administration of GST ended today after the Centre agreed to allow states control over most of small taxpayers, but the rollout date was pushed back by 3 months to July 1.

The split of GST taxpayers between the two will be done horizontally with states getting to administer and control 90 per cent of the assessees below Rs 1.5 crore annual turnover, and the remaining 10 per cent coming under the Centre.

The Centre and states will share control of assessees with annual turnover of over Rs 1.5 crore in 50:50 ratio even as Finance Minister Arun Jaitley insisted that each tax payer will be assessed only once and by only one authority.

Besides ceding control, the Centre also agreed to the demand of coastal states, allowing them to tax economic activity in 12 nautical miles even though constitutionally the Centre has jurisdiction over territorial waters.

“This is a significant headway,” Jaitley said after the meeting.

While a four-rate tax slab of 5, 12, 18 and 28 per cent had already been reached, a consensus on the administration of the Goods and Services Tax – which will subsume central and state levies like excise duty, service tax and VAT – paved the way for finalisation of the draft supporting laws.

Jaitley said the draft of Integrated GST or IGST, the tax which will be levied by the Centre on inter-state movement of goods and services, as well as SGST and CGST will be finalised in the next meeting of the GST Council on February 18.

Once approved, the Council will then decide on taxing various goods and services in different tax slabs, he said.

The stalemate over administration of GST had been holding up consensus in the GST Council since early November with four successive meetings failing to break the deadlock as the Centre was not in favour of a horizontal split. It said states did not have the expertise to administer levies like service tax.

The Centre also did not favour dual agencies auditing and scrutinising each taxpayer as multiple authorities could end up acting at cross-purposes.

With the legislative calendar drawn up, Jaitley said “realistic” date for implementation of GST will be July 1 instead of previously planned April 1.

Since GST is a transactional tax, which is to be levied when a sale takes place, it does not necessarily have to be implemented from the beginning of the fiscal, he said.

Source: RStv