NEW DELHI: Finance minister Nirmala Sitharaman on Thursday said that the economy is facing an extraordinary ‘act of God’ in form of the coronavirus pandemic which may result in contraction in India’s growth for the current fiscal.
“This year we are facing an extraordinary situation… we are facing an act of God which might even result in a contraction of the economy, to what percent I am not getting into that,” Sitharaman said while addressing the media after the 41st GST Council meet.
She also revealed that the pandemic has severely impacted GST revenues which has widen to Rs 2.35 lakh crore this year from a shortfall of Rs 70,000 crore last year.
As per the Centre’s calculation, the compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Hence, the total shortfall is estimated at Rs 2.35 lakh crore. Of this, Rs 97,000 crore is on account of GST shortfall, while the rest is due to the impact of Covid-19 on the economy.
Citing a legal opinion from the Attorney General, she ruled out the Centre making good the shortfall from either its coffers or borrowing against its balance sheet.
The minister also said that no proposal was made to raise taxes to make up for the shortfall compounded due to Covid. The deficit can be made good by states borrowing using a special window and the loan can be repaid after five years from the collection of GST cess.
When GST was implemented in 2017, the Centre had promised to compensate states for any revenue loss for five years from a pool created by levying cess over and above the GST on luxury and sin goods. However, this cess pool generated a surplus in the first two years but witnessed a deficit in FY20 as well as the current fiscal.
“This year we are facing an extraordinary situation… we are facing an act of God which might even result in a contraction of the economy, to what percent I am not getting into that,” Sitharaman said while addressing the media after the 41st GST Council meet.
She also revealed that the pandemic has severely impacted GST revenues which has widen to Rs 2.35 lakh crore this year from a shortfall of Rs 70,000 crore last year.
As per the Centre’s calculation, the compensation requirement by the states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be met from the cess levied in the GST regime. Hence, the total shortfall is estimated at Rs 2.35 lakh crore. Of this, Rs 97,000 crore is on account of GST shortfall, while the rest is due to the impact of Covid-19 on the economy.
Citing a legal opinion from the Attorney General, she ruled out the Centre making good the shortfall from either its coffers or borrowing against its balance sheet.
The minister also said that no proposal was made to raise taxes to make up for the shortfall compounded due to Covid. The deficit can be made good by states borrowing using a special window and the loan can be repaid after five years from the collection of GST cess.
When GST was implemented in 2017, the Centre had promised to compensate states for any revenue loss for five years from a pool created by levying cess over and above the GST on luxury and sin goods. However, this cess pool generated a surplus in the first two years but witnessed a deficit in FY20 as well as the current fiscal.
