According to top officials in the finance ministry, the 42nd Goods and Services Tax (GST) Council meeting headed by Finance Minister Nirmala Sitharaman has approved the extension of the GST compensation cess levy beyond 2022.
Sources said that levy will be reviewed and decided from time to time. The proposal was to extend the levy by two years until 2024.
The rift between BJP-ruled and opposition-led states may widen with the former set to seek faster disbursement of funds through the special borrowing window proposed by the Centre, having opted for borrowing Rs 97,000 crore.
But opposition-led states will demand that Centre borrows and provides to states, as opposed to states borrowing since it is the statutory obligation of the government to make up for revenue losses to states.
The GST Council will also take up a proposal to extend the GST compensation cess by two years to 2024 and set up a committee to look at the changes needed.
At the GST Council meeting on August 27, the Centre proposed that the states could borrow Rs 97,000 crore, equivalent to the revenue loss due to the GST transition, or Rs 2.35 lakh crore, equivalent to the revenue loss due to the GST transition and Covid-19 pandemic.
About 20 states have opted for the first borrowing option, but others have rejected both, which may prompt voting on the matter. States may also seek for a dispute resolution mechanism.
GST Council has worked on consensus among all stakeholders since inception, with the exception of one meeting where voting took place in December last year on the issue of state-level lotteries.
Sources say that some more options may be discussed by both Centre and states to arrive at a consensus.
The GST Council will also take up procedural issues aimed at simplification besides rate rationalisation on non-alcohol-based sanitizers.
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