Centre gives two options to States on GST compensation

News: Finance Minister has chaired the 41st GST Council meet.The council discussed states compensation and revenue losses.


  • Union Finance Minister has placed before the GST Council two options for borrowing by states to meet the shortfall in GST revenues pegged at Rs 2.3 lakh crore in the current fiscal.The two options are:
    • First Option: A special window can be provided to the states in consultation with the RBI at a reasonable interest rate for borrowing of Rs 97,000 crore.The amount can be repaid after five years from collection of cess.
    • Second Option: The states can borrow the entire Rs 2.35 lakh crore shortfall under the special window.

Additional Facts:

  • Goods & Services Tax(GST) Council: It is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax.
    • As per Article 279A(1) of the constitution, the GST Council was constituted by the President.
    • Composition: The council consists of the following members: a) The Union Finance Minister is the Chairperson b) The Union Minister of State in-charge of Revenue of finance and c) The Minister In-charge of finance or taxation or any other Minister nominated by each State Government.
  • GST Compensation Cess: It was introduced as relief for States for the loss of revenues arising from the implementation of GST for the period of first five years of GST implementation.It is levied on products considered to be ‘sin’ or luxury goods. 
  • National Anti-profiteering Authority(NAA): It was established under section 171 of the Central Goods and Services Tax Act, 2017 to monitor and to oversee whether the reduction or benefit of input tax credit is reaching the recipient by way of appropriate reduction in prices.