As per GST Compensation Law, states need to be given compensation, said the Finance Secretary, adding “Attorney-General said that GST compensation has to be paid for a transition period- from July 2017 to June 2022. Revenue has to be protected compensation gap to be met from cess fund, which in turn has to be funded from levy of cess.”
“As mentioned by Finance Minister in GST Council meeting held in March, legal views of the matter were sought from the Attorney General of India who said that GST compensation has to be paid for transition period from July 2017 to June 2022, the Finance Secretary said.
Ajay Pandey said, “AG’s clear opinion was that compensation gap cannot be met from India’s consolidated fund. Option 1 presented to GST Council was to provide a special window to states, in consultation with RBI to provide Rs 97000 crores at a reasonable interest rate.”
“Option 2 presented to GST Council was that the entire GST compensation gap of Rs 2,35,000 crore of this year can be met by states, in consultation with RBI. These options will be sent to states for a view within 7 days and will apply for this fiscal year only,” the Finance Secretary added.