NEW DELHI: Amid ongoing tensions between the Centre and the states over the GST compensation, the 15th Finance Commission, headed by NK Singh, will hold a day-long meeting with the Economic Advisory Council of the commission on Friday, over the issue of revenue and GST compensation. According to an official statement, the meeting is for a “final discussion on GDP growth, tax buoyancy of the Centre and the states, GST compensation, revenue deficit grant and fiscal consolidation”.
The members of the Economic Advisory Council who are likely to attend the meeting include Pinaki Chakraborty, Prachi Mishra, Omkar Goswami, Sajjid Z. Chenoy, Neelkanth Mishra, Rathin Roy, D.K. Srivastava, Arvind Virmani, M. Govinda Rao, Sudipto Mundle, Shankar Acharya, Pronab Sen as well as Krishnamurthy Subramanian.
The meeting is crucial as it comes at a time when the Centre is staring at massive 23.9 per cent contraction in the GDP growth during the April-June quarter. Further, there is a GST collection shortfall of Rs 3 lakh crore and exhausting fiscal deficit target in first four months itself. The Centre’s fiscal deficit during April-July stood at Rs 8.21 lakh crore or 103 per cent of 2020-21 budget estimates of Rs 7.96 lakh crore.
Sources claimed that the meeting is also crucial amid the growing impatience in even BJP-ruled states over delayed GST compensation, which policy makers said cannot be quickly fixed, if it continues to linger on for some more time. The issue of GST compensation has already caused a tussle between the Centre and several states. Earlier, many states have rejected the alternate mechanism that was provided by the Centre to help states get funds in the absence of compensation.
The Centre has proposed two borrowing options for the states. First, to borrow from a special window facilitated by the Reserve Bank of India or from market — to meet the Rs 2.35 lakh crore GST shortfall, and secondly, it has proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022. The compensation due to the states in April-July period stood at Rs 1.5 lakh crore. However several states have not yet agreed upon it yet.