Telangana to seek early release of GST compensation

Hyderabad: Telangana will seek early release of pending GST (Goods and Services Tax) compensation to the State at the 45th GST Council meeting scheduled to be held at Lucknow in Uttar Pradesh on September 17. The State government, which had strongly opposed the Centre’s attempt to impose ‘backdoor GST’ on liquor in the name of […]

Hyderabad: Telangana will seek early release of pending GST (Goods and Services Tax) compensation to the State at the 45th GST Council meeting scheduled to be held at Lucknow in Uttar Pradesh on September 17.

The State government, which had strongly opposed the Centre’s attempt to impose ‘backdoor GST’ on liquor in the name of ‘extra neutral alcohol’ or ENA during the previous meeting of GST Council, is also likely to oppose the proposed inclusion of petroleum products in the GST regime.

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For the first time after Covid-19 pandemic last year, the GST Council will be meeting physically in Lucknow. Finance Minister T Harish Rao has already been communicated in this regard and he will be attending the meeting, official sources said.

One of the major issues on the State’s agenda would be pending GST compensation for the State including Integrated GST (IGST) funds. The Union government owes nearly Rs 4,073 crore of GST compensation to the State which witnessed a steep fall in GST collections as well as the State revenues due to the Covid-19-induced economic slowdown. Telangana was meted out step-motherly treatment even under the Centre’s special borrowing scheme, with the State receiving the lowest GST compensation i.e. Rs 2,197 crore during the financial year of 2020-21. The State government has also been demanding around Rs 218 crore IGST which is pending from the Union government and also ensure disbursement of the compensation due to the State expeditiously.

The State government will also strongly pitch for an extension of the period of compensation cess beyond five years, in the wake of Covid-19 impact on the economy. It may be recalled that the States had agreed to join the new tax regime of GST, with a condition that they would be compensated for any revenue loss in the first five years from July 1, 2017 to June 2022. The Union government, it is learnt, was however, reluctant on this score.

The State government is likely to oppose the Centre’s proposal to bring select petroleum products like natural gas under the ambit of GST. During the last GST Council meeting, Telangana had already raised strong objection over the Centre’s proposal of including extra neutral alcohol or ENA which accounts for nearly 35 per cent of the total liquor production cost. Liquor and petroleum products were kept out of the ambit of GST when it was enforced in the country in June 2017 following severe concern expressed by States over loss of their own tax revenue, if they are brought under GST. But the Centre is now adopting ‘backdoor methods’ to impose GST on both liquor and petroleum products.

Harish Rao is also likely to reiterate the State’s demand to raise FRBM (Fiscal Responsibility and Budget Management) limit to 5 per cent to give a boost to financial activities.

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