Many states seek extension of GST compensation; no decision taken

About a dozen states cutting across party lines on Wednesday pitched for extending the mechanism to compensate states for revenue lost from the implementation of GST beyond June 30, but no decision was taken.

Briefing reporters about deliberations at the two-day meeting of the GST Council in Chandigarh, Union Finance Minister Nirmala Sitharaman said finance and other ministers of 16 states spoke on the compensation issue.

Of the 16 states, 3-4 spoke of evolving their own revenue stream to break from the compensation mechanism, she said.

The Centre did not reveal its mind on the issue.

When a nationwide Goods and Services Tax (GST) subsumed 17 central and state levies from July 1, 2017, it was decided that states will be compensated for any loss of revenue from the new tax for five years.

That five-year term is ending on June 30.

With two years being lost in the pandemic, states have sought an extension of this compensation mechanism.

The Council - the highest decision-making body of the indirect tax regime, which is headed by the Union Finance Minister and comprises representatives of all states and UTs - discussed the issue at a meeting in Chandigarh but did not take a decision.