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The Centre is contemplating a number of options to supply state governments affected by the expiration of the Items and Providers Tax (GST) compensation on June 30, 2022, with some monetary aid.
In line with the newly developed technique, states will obtain income safety for a length of, say, two years, and at a price far decrease than the 14 p.c annual improve they’ve seen during the last 5 years till June 30.
As per an official supply, the plan is to supply them the flexibleness to navigate the part of slower revenue development till the GST generates sufficient income momentum to unravel the states’ income points within the subsequent three years.
One of many options entails restructuring the Rs 2.7 trillion in back-to-back loans that the Centre took within the earlier two fiscal years to make up for the GST compensation cess fund deficiency.
This might imply that beginning in March 2026, the payback interval for these loans, which had been negotiated underneath a particular RBI window at low costs, can be extended by one or two years. In line with the supply, this would supply the Centre with more cash so it might proceed to protect states’ income for an additional two years, leading to a income improve of 10–11%.
Acquiring recent loans is a unique different. Naturally, each potentialities would name for the cesses on “luxurious and demerit objects” to be prolonged by way of the tip of FY26. As a solution to pay for the particular loans, these taxes have already been prolonged by way of March 31, 2026.
“A proper debate of increasing the compensation to states has not but taken place. Nevertheless, if the Centre is required to consent to pay the states’ compensation for an additional timeframe, it will undoubtedly renegotiate the 14 p.c (assured income development), which has no basis, a authorities official mentioned.
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