GST collections in the past two months have only reached 45% of the target amount, Finance Minister Nirmala Sitharaman said here on Friday. She was speaking after a GST Council meeting where State Finance Ministers were given a presentation on the issue.
Given the shortfall in revenue, the council will meet again in July to discuss the issue of compensation cess and dues to States, and the possibility of borrowing money from the market to meet these dues.
The council approved a slew of measures to ease tax compliance, including reduction in late fees for past returns, and COVID-19 related relief for small tax payers for the period between February and July 2020 provided returns are filed by September.
Asked about the States’ concern regarding a decline in revenues compared with the targeted amounts in the past two months, Ms. Sitharaman said: “The States watched the presentation. They understood what all the collections were. It was in the range of about 45% only.”
Also read: Centre to release another ₹34,000 cr. GST compensation to States soon
Revenue Secretary Ajay Bhushan Pandey said that as the States were involved in the collections process, they were aware of the situation. Although GST collection data is usually released on a monthly basis, no data has yet been released for April or May.
Under GST law, the Centre must pay States full compensation for any shortfall in revenue collections until 2022.
Also read: GST revenues not enough for States’ compensation: Centre
Last week, the Centre paid pending compensation dues for the December 2019 to February 2020 period. However, with revenues crashing since the lockdown, alternative options may be explored.
“In July, on the request of all ministers, there shall be a meeting to discuss exclusively one agenda point, and that is compensation cess which has to be given to the States, and if at all it results in some kind of borrowing, how and who is going to pay for it,” Ms Sitharaman said.
Businesses who have not filed their GSTR-3B returns from July 2017 to January 2020 can avail of a reduced late fee of ₹500 if they have tax liabilities and a late fee waiver for those with nil liabilities, so long as returns are filed between July 1 and September 30, the Council decided.
Small taxpayers with an aggregate turnover of ₹5 crore or less will not be charged any interest for late filing of returns for the tax period of February, March and April 2020 until July 6. For returns filed after that but before the end of September, the rate of interest has been reduced from 18% to 9%. For late filing of returns for May, June and July, interest charges will be waived for small tax payers if filing is completed by September. A one-time extension is also being granted to those seeking to revoke cancelled GST registrations.
The GST Council also agreed that there is a need to correct the inversion of duties, but postponed a decision on when to do so.
“While there was not much for larger businesses, the late fee waivers and additional moratorium for smaller businesses is quite a welcome move,” said Ernst and Young tax partner Abhishek Jain. “With the current financial situation, smaller businesses were aggressively seeking stimulus and some of their requests have been well considered by the Council.”
