16 to 17 states seek extension of GST compensation mechanism

Finance Minister Nirmala Sitharaman said on Wednesday that around 16 to 17 states have proposed extending the mechanism to compensate states for revenue lost due to the implementation of GST beyond June 30, but no decision was taken.

At a press briefing on the decisions of the 47th GST Council meeting in Chandigarh, Sitharaman stated, On compensation cess, broadly states that compensation can be continued for at least a few years, if not for 5 years. She said that 16 of the 16 states spoke of developing their own revenue stream to break out of the compensation mechanism.

The Centre didn't reveal its mind on the issue.

When a nationwide Goods and Services Tax subsumed 17 central and state levies from July 1, 2017 it was decided that states will be compensated for any loss of revenue from the new tax for five years. With two years lost in the pandemic, states have sought an extension of this compensation mechanism.

The Council - the highest decision-making body of the indirect tax regime, headed by the Union Finance Minister and comprises representatives from all states and UTs - discussed the issue at a meeting but did not make a decision.

In her press briefing, Sitharaman said that the Council has decided to maintain the status quo on taxing online gaming, casinos, horse racing. It was earlier predicted that the GoM was considering taxing these elements on the highest 28 per cent tax rate.

Following Goa's request for special treatment for casinos, it was decided that Group of Ministers GoM will give one more hearing for online games and horse racing, as well as a discussion on the tax decision on casinos, according to Sitharaman.

She added that a final decision is likely to be made at the next council meeting in August.