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End of GST regime gives jitters to TS
End of GST regime gives jitters to TS
- Change in regime makes States not eligible for compensation
- TS govt to face new challenges in financial management
- TS to seek extension of compensation period by 5 years
- States advocating 1% slab hike could mop up at least Rs 50K cr
Hyderabad: The GST regime will end in June. This would mean that the states will no longer be eligible to get compensation for any loss in revenue due to implementation of GST.
As per the GST Act, compensation to states was to be provided for five years from the date on which the state brings its State GST Act into force. This will pose new challenges to the state government in financial management. The Telangana government is holding discussions with experts on this issue and is likely to argue for extension of time limit for compensation by another five years. It is of the opinion that the compensation should not be stopped till an alternative mechanism to safeguard the state financial resources was worked out by the Centre.
The state government will make this demand at the next GST council meeting to be chaired by the Union Finance Minister in May. The Centre is yet to release the dues of GST to the states. The state government is also examining the option suggested by some states which feel that in case compensation cannot be further extended, the Centre should make amends to the slabs. The present 5 per cent slab should become 8 per cent and so on. The states advocating higher slab rates say that even 1 per cent hike would help them mop up about Rs 50,000 crore.
The Telangana government would present the loss the economy had suffered due to Covid and emphasise on the need to extend the period of compensation. It will argue that since the states were just recovering from the revenue loss they suffered during the last two years of the pandemic, the new tax structure could adversely affect the revenue.
It says that the Centre was trying to impose 'backdoor GST' on liquor in the name of 'extra neutral alcohol' and inclusion of petroleum products in the GST regime. If the compensation is withdrawn at this stage, it would slow down the economic growth and would affect the development process, officials said.
