scorecardGST compensation deadlock continues — government to release ₹20,000 crore cess tonight and offers relief for small companies
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GST compensation deadlock continues — government to release ₹20,000 crore cess tonight and offers relief for small companies

GST compensation deadlock continues — government to release ₹20,000 crore cess tonight and offers relief for small companies
PolicyPolicy2 min read
Finance Minister Nirmala Sitharaman at the press briefing of the 42nd GST Council meeting    PIB
  • The stalemate over the Goods and Services Tax (GST) compensation cess remains. The GST Council will meet again on October 12 to discuss the issue.
  • Finance Ministry to dole out ₹20,000 crore of GST compensation cess to states tonight.
  • Small businesses with turnover of less than ₹5 crore will only be required to file returns every quarter starting January 1, 2021, instead of monthly returns.
  • Companies looking to launch satellites will be exempt from paying 18% GST if they use Indian Space Research Organisation (ISRO) or New Space India Limited (NSIL) facilities.
The 42nd meeting of the GST Council led by Finance Minister Nirmala Sitharaman stretched over seven hours, but did not reach a consensus on borrowing for compensation cess.

“We did take a decision that the cess will have to extend beyond the five years that it was originally mandated,” said Sitharaman. Now, the next meeting is scheduled to take place on October 12 to discuss the issue on compensation borrowing options further.

For now, the states will be coming into some money as soon as tonight. “This year, till now, whatever has been collected under the compensation cess which totals to around ₹20,000 crore will get disbursed tonight to all the states,” said the Finance Minister iterating that nothing will be kept with the government.

She also disclosed that Integrated Good and Services Tax (IGST) dues to the tune of ₹ 24,000 crore will be released to the states who received less than their fair share back in 2018 by the end of next week.

Others changes to the GST announced include:
  • From Jan 1, 2021, taxpayers in the ‘small’ category (turnover of less than ₹5 crore) will not be required to file monthly returns. They will only file quarterly returns.
  • For taxpayers with turnover more than ₹5 crore, they will have to mention HSM code up to six digits to facilitate transparency in the system.
  • Refunds will be given from only those bank accounts validated with PAN and Aadhaar starting 1 Jan 2021. The refund application can be signed using Aadhaar authentication.
  • Those companies and startups launching satellites using Indian Space Research Organisation (ISRO) or New Space India Limited (NSIL) facilities will be exempt from paying 18% GST.
GST compensation cess deadlock continues
According to Sitharaman, the majority of the states opted for option 1. However, others didn’t go for any of the options. The ones who chose desist from a preference believed that states shouldn’t be borrowing; it should be the Centre that bears the burden.

“It was felt you can’t really decide on the basis of the 20 who have written to you, you need to talk further. I was subjectively reminded that I should not be taking anyone for granted,” she said, explaining why another meeting will now be held on October 12.

According to the Finance Minister of Kerala Thomas Isaac, ten states demanded that full compensation should be paid to the states during the current year as per clauses in the law and centre should borrow.

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