Finance Minister Nirmala Sitharaman on Thursday referred to COVID-19 pandemic as an “act of God” and said there could be contraction of the economy. Sitharaman, who talked to reporters through video conferencing after 41st meeting of GST Council, said the two options for compensating states on the Goods and Services Tax (GST) to bridge revenue shortfall, will be available only for this year.
“This year we are facing an extraordinary situation. We are facing an act of God where we may even see a contraction of the economy,” she said. The Centre on Thursday gave two options for compensating states on the Goods and Services Tax (GST) to bridge revenue shortfall as the economy faces a prospect of contraction in the current fiscal year due to the COVID-19 crisis.
The first option provides a special window to states in consultation with the Reserve Bank of India (RBI) to provide Rs 97,000 crore at a reasonable rate of interest. This money can then be repaid after five years from the collection of cess. The second option is that the entire GST compensation gap of Rs 2.35 lakh of this year can be met by states in consultation with the RBI.
“Once the arrangement is agreed upon by GST Council, we can proceed fast & clear these dues and also take care of the rest of the financial year. These options will be available only for this year; in April 2021, the Council will review and decide action for the fifth year,” she said.