GST Council Meet: FM Nirmala Sitharaman says 'Act of God' may result in contraction of economy this fiscal

Referring to the spread of coronavirus pandemic as ‘Act of God’, finance minister Nirmala Sitharaman while addressing media on Thursday, said that it might lead to a contraction of economy this fiscal. The finance minister’s statement came after a long GST Council meet because of which her virtual press conference had to be delayed.  

“'Act of God' may result in contraction of economy this fiscal,” the FM said, during the online conference. She said that options were discussed for meeting GST shortfall only for current fiscal and the council will look at issue again in April next year. 

The GST council also discussed ways to compensate the states during its five hour long meet, confirmed the finance minister. She said that as many as two such options were talked about. 

Meanwhile, the revenue secretary confirmed that Rs 1.5 lakh cr are due to states for April-July in GST compensation. He also confirmed that GST shortfall in FY21 was at Rs 2.35 lakh cr; of which only Rs 97k cr due to implementation of GST, rest due to pandemic. 

“Attorney General has opined that shortfall in GST collections cannot be met from Consolidated Fund of India,” said Revenue Secretary. 

Reacting to the statements, MS Mani, Partner, Deloitte India said that not considering any rate increases to make up for the shortfall in cess is a welcome measure, however moving to a market borrowing mechanism which would extend the tenure of the cess beyond 5 years would worry businesses that are subject to the cess. 

“Any decision to extend the cess beyond 5 years in order to fund the present compensation deficit could become a precedent, hence the period of extension of the cess should be minimal and predefined so that the cess does not become a permanent tax,” Mani added.